Case 5.1 Disaster and Consumer Value

Two 1000 dollar face value bonds are both redeemable at par, with the first having a redemption date 3 years prior to the redemp

finlep [7]

Answer:

$ 915.71

Explanation:

In order to determine the second bond price we need to determine the number of years to maturity of the first bond using nper formula in excel.

=nper(rate,pmt.-pv,fv)

rate is the semiannual interest rate of 6% (12%*6/12)

pmt is the semiannual interest=$1000*8.3%*6/12=$41.50

pv is the current price at $813.04

fv is the face value of $1000

=nper(6%,41.50,-813.04,1000)= 16.00

The years to maturity=16/2=8 years

The years to maturity of second bond=8+3=11 years

price of second bond=-pv(rate,nper,pmt,fv)

rate is 6%

nper is 11 years multiplied by 2= 22

pmt =5.3%*$1000=$53

fv is $1000

=-pv(6%,22,53,1000)=$915.71

5 0

3 years ago

Read 2 more answers

Suppose that borrowing is restricted so that the zero-beta version of the CAPM holds. The expected return on the market portfoli

statuscvo [17]

Answer:

The expected return on a portfolio is 14.30%

Explanation:

CAPM : It is used to described the risk of various types of securities which is invested to get a better return. Mainly it is deals in financial assets.

For computing the expected rate of return of a portfolio , the following formula is used which is shown below:

Under the Capital Asset Pricing Model, The expected rate of return is equals to

= Risk free rate + Beta × (Market portfolio risk of return - risk free rate)

= 8% + 0.7 × (17% - 8%)

= 8% + 0.7 × 9%

= 8% + 6.3%

= 14.30%

The risk free rate is also known as zero beta portfolio so we use the value in risk free rate also.

Hence, the expected return on a portfolio is 14.30%

6 0

3 years ago

The erie canal connected industry and consumers in the east with what group?

umka21 [38]

The Erie canal was able to connect industries and consumers in the east with c. Midwestern farmers.

The Erie Canal:

Was completed in 1825
Connected New York City and the Great Lakes
Allowed for goods to be shipped to and from the New York to the Great Lakes

The Great Lakes were accessible to farmers in the midwestern region and after the Erie Canal was built, farmers were able to send their produce via the Great Lakes and through the Erie Canal to New York City where it could be purchased by industries and people or shipped internationally.

In conclusion, the Erie canal was very important to midwestern farmers as it increased their reach.

Find out more at brainly.com/question/6499420.

Options for this question include:

a. Southern planters

b. Canadian fur traders

c. Midwestern farmers

d. New England fishers

7 0

2 years ago

Elly owns a small coffee shop. she has only one employee. one weekend, she decided to take a break from work. she is wondering

Rudiy27

The answer to your question is
 $\boxed{\bf C.~backwards~induction}
$ 


$\bf Explanation:$

Backward induction is a process of decision making where you reason backward of the situation.

Hope this helped!

5 0

3 years ago

Which of these individuals is an entreneur ?

wlad13 [49]

Answer:

A. a computer programmer who starts her own software Company

Explanation:

Entrepreneurship is the process through which new businesses are started. An entrepreneur is a person who takes risks by committing their time and resources to start a business.

The computer programmer is the entrepreneur in this case. She is starting a new software business. Other than her computer skills, she will need to be creative and innovate to develop products that will appeal to customers. She will take all risks of her new business but also stand to enjoy its success.

7 0

3 years ago