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dusya [7]
3 years ago
14

One-year Treasury securities yield 4%. The market anticipates that 1-year from now 1-year Treasury securities will yield 2.1%. I

f the pure expectations theory is correct, what should be the yield today for 2-year Treasury securities? Write your answer as a percentage, i.e. for example write 8% as 8.
Business
1 answer:
Lesechka [4]3 years ago
8 0

Answer:

3.05%

Explanation:

According to Pure Expectation Theory, the future short term interest rates are actually the forward rates.

Mathematically,

(1 + r2,0)^2 = (1 + r1,0)^1 * (1 + r1,1)^1

Here,

r2,0 is the rate of interest for 2 year treasury security from today

r1,0 is the rate of the interest for 1 year treasury security from today

r1,1 is the rate of the interest for 2 year treasury security from Year 1

By Putting Values, we have:

(1 + r2,0)^2 = (1 + 0.04)^1 * (1 + 0.021)^1

(1 + r2,0)^2 = 1.06184

By taking square-root on both sides, we have:

(1 + r2,0) = 1.0305

r2,0 = 3.05%

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Answer:

Both will bear

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3 years ago
Recommend further strategies companies woolworths in south africa may use to protect the environment
djverab [1.8K]

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3 0
1 year ago
The aims of mercantilists do not include
fomenos

Answer:

B) achieving political and economic unity

Explanation:

The goals of mercantilism were to increase the wealth of the government (accumulate gold and silver) by controlling economic affairs, and ultimately increasing the power of the nation (both economic and military). You must remember that mercantilism was popular during the 17th and 18th century when democracy didn't exist, and the Kings and Queens were eager to increase their personal wealth, power and greatness.

4 0
3 years ago
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<span>Therefore the answer to this question is<span> “All of these answers are correct”.</span></span>

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The following data are taken from the financial statements of Sigmon Inc. Terms of all sales are 2/10, n/45.
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Answer:

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A  Sales on account                          $5,637,500    $4,687,500

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C Ending accounts receivables        $725,000      $650,000

Average accounts receivables        $687,500      $625,000 [D=(B+C) / 2[

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No of days in sales receivables       44.5                48.7          [F=365 / E]

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