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Juliette [100K]
2 years ago
12

a 2-year treasury security currently earns 6.75 percent. over the next two years,the real interest rate is expected to be 3.18 p

ercent per year and the inflation premium is expected to be 2.18 percent per year and the inflation premium is expected to be 2.18 percent per year. What is the maturity risk premium on the 2-year Treasury security? A 1.00% B.1.35% C.1.39% D.5.36
Business
1 answer:
Anna35 [415]2 years ago
3 0

The maturity risk premium on the 2-year Treasury security is C. 1.39%

Using this formula

rd = r* + IP + MRP

Where

rd represent Required rate of return on 2-year Treasury Security = 6 75%

r* represent real risk free return = 3.18%

IP represent Inflation Premium = 2.18%

MRP represent Maturity Risk Premium

Let plug in the formula

6.75% = 3.18% + 2.18% + MPR

6.75%=5.36%

MRP=6.75% -5.36%

MRP = 1.39%

Inconclusion the maturity risk premium on the 2-year Treasury security is C. 1.39%.

Learn more here:

brainly.com/question/15314847

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You can receive 400,000 five years from today or 1,000,000 thirty years from today. what interest rate makes them equivalent?
deff fn [24]

Answer:

3.73%

Explanation:

The computation of the rate of interest that makes the equivalent is shown below:

As we know that

Present value=Cash flow × Present value discounting factor ( interest rate% , time period)

Let us assume the interest rate be x

where,

Present value of $400,000 is

= $400,000 ÷ 1.0x ^5

And,

Present value of $1,000,000 be

= $1,000,000 ÷ 1.0x^30

Now eqaute these two equations

$400,000 ÷ 1.0x^5 = $1,000,000 ÷ 1.0x^30

(1.0x^30) ÷ (1.0x^5) = $1,000,000 ÷ $400,000

1.0x^(30 - 5)=2.5

1.0x^25=2.5

1.0x = (2.5)^(1 ÷ 25)

x =1.03733158 - 1

= 3.73%

3 0
3 years ago
Kanye, Jonny, Jaco, and Neil are trying to form a band. They each have some basic skills on most instruments, so their current p
Naddika [18.5K]

Answer:

2- Have each member specialize in the role that they are best in, to take advantage of benefits from specialization.

Explanation:

Here are the options

1- Continue with the current plan, as economies of scale should eventually kick in.

2- Have each member specialize in the role that they are best in, to take advantage of benefits from specialization.

3- Abandon the band, as continued practice is doomed to suffer diminishing marginal returns.

4- Invest their remaining savings in new instruments, as they are at a point where the marginal product of capital exceeds the marginal product of labor.

5- Change the rotation to be random rather than equal, to take advantage of heteroskedasticity.

Specialisation is when a person focuses on an activity in which they are efficient in or have a comparative advantage in

A person has a comparative advantage in production if he produces at a lower opportunity cost when compared to other people

Jaco seems to be efficient at playing bass, thus he should specialise in this activity

Jonny seems to be efficient at playing the guitar, thus he should specialise in this activity

An advantage of specialisation : Increased efficiency as a result of carrying out the same activity multiple time.

8 0
2 years ago
A _________ is generally considered an appreciating asset because it may _________ in value over time.
jeka94

A house is generally considered an appreciating asset because it may increase in value over time. Appreciation is an increase in the value of an asset over time. The increase of the value of the house may occur for a number of reasons, including increased demand or weakening supply, or as a result of changes in inflation or interest rates. One example would be: the neighborhood became very famous, so the value of the houses there will increase, because the demand will increase.

8 0
3 years ago
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Bailey Co. changed their accounting for insurance expense from the cash-basis to the accrual-basis in the current year. In Janua
Rina8888 [55]

Answer:

$60,000

Explanation:

Since Bailey Co. changed their accounting for insurance expense from the cash-basis to the accrual-basis in the current year, and in January of the prior year, Bailey recorded insurance expense of $240,000 for the cash purchase of a four-year insurance policy.

Bailey should report the insurance transaction in the current year's financial statements of an amortization of the insurance expense over the four year period, and take account the portion that pertains to the current year.

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3 years ago
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blondinia [14]

Answer:

If the firm is going to need less than 50,000 motors, they should purchase them from the outside vendor.

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Explanation:

Process A:

contribution margin per unit = $11 - $7 = $4

break even number of units = $200,000 / $4 = 50,000 units

Process B:

contribution margin per unit = $11 - $8 = $3

break even number of units = $180,000 / $3 = 60,000 units

8 0
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