1answer.
Ask question
Login Signup
Ask question
All categories
  • English
  • Mathematics
  • Social Studies
  • Business
  • History
  • Health
  • Geography
  • Biology
  • Physics
  • Chemistry
  • Computers and Technology
  • Arts
  • World Languages
  • Spanish
  • French
  • German
  • Advanced Placement (AP)
  • SAT
  • Medicine
  • Law
  • Engineering
Alexxx [7]
3 years ago
9

Assume that the rate on a 1-year bond is now 6%, but all investors expect 1-year rates to be 7% one year from now and then to ri

se to 8% two years from now. Assume also that the pure expectations theory holds, hence the maturity risk premium equals zero. Which of the following statements is CORRECT?
A. The yield curve should be downward sloping, with the rate on a 1-year bond at 6%.
B. The interest rate today on a 2-year bond should be approximately 6%.
C. The interest rate today on a 2-year bond should be approximately 7%.
D. The interest rate today on a 3-year bond should be approximately 7%.
E. The interest rate today on a 3-year bond should be approximately 8%.
Business
1 answer:
AnnZ [28]3 years ago
7 0

Answer:

Option (D) is correct.

Explanation:

Given that,

Rate on a 1-year bond, now = 6%

Expected rate on a 1-year bond, one year from now = 7%

Expected rate on a 1-year bond, two years from now = 8%

Maturity risk premium = 0

Therefore, the interest rate today on a 3-year bond should be approximately:

= (Rate on a 1 year bond, now + Rate on a 1 year bond, one year from now + Rate on a 1 year bond, two years from now) ÷ Number of years

= (6% + 7% + 8%) ÷ 3

= 21% ÷ 3

= 7%

You might be interested in
Please please.pleas help me
Scilla [17]
Answer: in pic
explanation: found here https://environmental-conscience.com/being-a-consultant-pros-cons/

8 0
3 years ago
This business pays income taxes on the sales of its products each year.<br> This is:
coldgirl [10]

Explanation:

what is the question??

5 0
3 years ago
Read 2 more answers
Which of the following scenarios would be included in GDP? Pam buys a new 40-inch television at Walmart. Sandra is a waitress at
kkurt [141]

Answer:

A.  Pam buys a new 40-inch television at Walmart.

Explanation:

Gross Domestic Product is the sum monetary value of goods and services purchased in a country within a specific length of time. It can be calculated on an annual or quarterly basis. It helps economists in making decisions. The GDP has to be recorded so that it can be accounted for. The GDP is calculated based on income, expenditure, or production.

From the options given, only Pam has performed an activity that can be rightly included in GDP. This is because she purchased an item (expenditure) that would be recorded by the supermarket and eventually accounted for in the country's GDP.

3 0
3 years ago
Stacy will receive equal annual payments of $30,000 with her first payment received in 3 years from today and her last payment r
jok3333 [9.3K]

Answer:

$172,117.5529

Explanation:

In economics and finance, present value, also known as a present discounted value, is the value of an expected income stream determined as of the date of valuation.

Total years = 3 to 9 = 6years

Present value = future cash flow/(1+i)^n

Present value = $30,000 + $30,000/(1.072)^1 + $30,000/(1.072)^2 + $30,000/(1.072)^3 + $30,000/(1.072)^4 + $30,000/(1.072)^5 + $30,000/(1.072)^6

Present value = $172,117.5529

8 0
3 years ago
Pat invested a total of $3,000. Part of the money was invested in a money market account that paid 10 percent simple annual inte
Nana76 [90]

Answer:

how much did Pat invest at 10 percent and how much at 8 percent?

2200 10%

 800  8%

Explanation:

I=C*%I*T

I=C1*0,08*1+C2*0,10*1

3000=C1+C2

C1=3000-C2

256=(3000-C2)*0,08+C2*0,10

256=240-0,08C2+O,10C2

16=0,02C2

C2=800

C1=2200

I=2200*0,1= 176

I=800*0,08=80

8 0
3 years ago
Other questions:
  • Tanner Company, a subsidiary acquired for cash, owned equipment with a fair value higher than the book value as of the date of c
    5·1 answer
  • Cho's Performance Pizza is a small restaurant in Miami that sells gluten-free pizzas. Cho's very tiny kitchen has barely enough
    5·1 answer
  • Paulina works as a software engineer for her firm. Recently, her company was acquired by another firm that had its own informati
    10·2 answers
  • What finger do you use to strike the T key?
    9·2 answers
  • a procedure on the medicare nonparticipating fee schedule is priced at $320. How much can the nonparticipating provider charge f
    14·1 answer
  • David is the CEO of a large fast food chain. One part of his job is to meet with
    9·1 answer
  • Who is responsible for withholding the employees income tax?​
    14·1 answer
  • Identifying Job Application Tools
    9·2 answers
  • Sonia thinks she would like to work in the marketing field. Which student organization would be most likely to help her learn ab
    6·1 answer
  • According to the master syllabus, should you purchase outside textbooks for the courses?
    10·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!