Answer:
Arbitrage opportunity may exists as the ZCBs selling at different price at same time due to change in their YTM .
The PV of 100 face value zcb with different ytm are different , in this case.
for one year maturity with face value 100 current price = fv/ pv at 8% = 92.59
for Two year maturity with face value 100 current price = fv / Pv at 9% for two years = 84.167 , if the bond holder sell the bond after 1 year only, the price = 91.74 .
a) The arbitrage opportunity exist with buy two bond with face value 100 with maturity of 1 year and face value 110 with maturity of 2 years.
b) profit 0.01 , as difference between PV of both bond at their YTM rate.
Answer:
price
Explanation:
Possession utility is the value customers have while buying a product and they have the choice to use the product for the purpose it was made for or finding a new way to use the product.
Buying and selling of anything involves transfer of ownership from one to another. So to be successful in this throat cutting competition one should strategize to make this transfer of possession easy. So possession utility is what lets customer physically asses what they bought.
Answer:
20; $1 billion
Explanation:
Given that,
New funds = $20 billion
Required reserve ratio = 5%
Money multiplier:
= 1/Required reserve ratio
= 1/0.05
= 20
Initial money increase by:
= Funds wants to be in the money supply × Required reserve ratio
= $20 billion × 5%
= $1 billion
Therefore, the Fed should initially increase $1 billion in the money supply.
