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tatyana61 [14]
3 years ago
8

The expectations theory of the term structure of interest rates states that forward rates are determined by investors' expectati

ons of future interest rates. All of the options are correct. yields on long- and short-maturity bonds are determined by the supply and demand for the securities. forward rates exceed the expected future interest rates. None of the options are correct.
Business
1 answer:
ra1l [238]3 years ago
7 0

Answer:

forward rates are determined by investors' expectations of future interest rates.

Explanation:

The expectations theory of the term structure of interest rates states that forward rates are determined by investors' expectations of future interest rates. It suggests that the predicted holding period rate of return of a bond of "x" number of time is equal to the short-term interest rate irrespective of its maturity.

The Expectations theory gives us the opportunity to predict the future outcome of short-term interest rates based on current long-term interest rates.

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Purchasing power parity (PPP): a. almost never holds completely. b. is as commonly accepted as the law of demand. c. is a reason
Ahat [919]

Answer:

The correct answer is letter "D": represents the universality of exchange rate systems.

Explanation:

Purchasing Power Parity or PPP compares different countries' currencies through a market's basket of goods approach. Two currencies are in PPP when a market basket of goods, taking into account the exchange rate is priced the same in both countries. PPP currency rates are considered more accurate than market-exchange rates.

4 0
3 years ago
Jim Busby calls his broker to inquire about purchasing a bond of Disk Storage Systems. The broker quotes a price of $1,180. Jim
Dimas [21]

Answer:

Jim Busby and Bonds of Disk Storage Systems

The new price of the bond is:

= $21,059

Explanation:

a) Data and Calculations:

Quoted price of bond = $1,180

Face value of bond = $1,000

Coupon interest rate = 14%

Bond's maturity period = 25 years

Current yield to maturity = 12%

Therefore, new price of the bond is computed as follows:

Bond Price = C* (1-(1+r)-n/r ) + F/(1+r)n

where C = Periodic coupon payment = $140 ($1,000 * 14%)

• F = Face / Par value of bond = $1,000

• r = Yield to maturity (YTM) = 12% and

• n = No. of periods till maturity = 25 years

= $140 * (1 – (1+0.12)^-25)/0.12 +$1000/(1+0.12)^25

= $140 * (1 - -17.00)/0.12 + $1,000/17.00

= $140 * (18.00)/0.12 + $1,000/17.00

= $140 * 150 + $59

= $21,000 + $59

= $21,059

 

5 0
2 years ago
What serves as an incentive for entrepreneurs
nordsb [41]
Profit is the answer
3 0
3 years ago
Read 2 more answers
Using the continuous compounding equation, if someone invested $5,000 at an interest rate of 3.5%, and someone else invested $5,
UNO [17]

Answer:

Therefore after 16.26 unit of time, both accounts have same balance.

The both account have $8,834.43.

Explanation:

Formula for continuous compounding :

P(t)=P_0e^{rt}

P(t)=  value after t time

P_0= Initial principal

r= rate of interest annually

t=length of time.

Given that, someone invested $5,000 at an interest 3.5% and another one  invested $5,250 at an interest 3.2% .

Let after t year the both accounts have same balance.

For the first case,

P= $5,000, r=3.5%=0.035

P(t)=5000e^{0.035t}

For the second case,

P= $5,250, r=3.5%=0.032

P(t)=5250e^{0.032t}

According to the problem,

5000e^{0.035t}=5250e^{0.032t}

\Rightarrow \frac{e^{0.035t}}{e^{0.032t}}=\frac{5250}{5000}

\Rightarrow e^{0.035t-0.032t}=\frac{21}{20}

\Rightarrow e^{0.003t}=\frac{21}{20}

Taking ln both sides

\Rightarrow lne^{0.003t}=ln(\frac{21}{20})

\Rightarrow 0.003t}=ln(\frac{21}{20})

\Rightarrow t}=\frac{ln(\frac{21}{20})}{0.003}

\Rightarrow t= 16.26

Therefore after 16.26 unit of time, both accounts have same balance.

The account balance on that time is

P(16.26)=5000e^{0.035\times 16.26}

              =$8,834.43

The both account have $8,834.43.

7 0
3 years ago
3. ___________ involves an increased focus on identifying and using data internally and across a supply chain so that a company
QveST [7]

Answer:

Strategic sourcing

Explanation:

Strategic sourcing is a process that is part of the supply chain management in which the organization analyzes and reviews its procurement activities and from that, makes improvements to these activities to add more value. According to this, the answer is that strategic sourcing involves an increased focus on identifying and using data internally and across a supply chain so that a company can consolidate its purchasing power for enhanced value.

4 0
3 years ago
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