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
Ludmilka [50]
3 years ago
6

The yield to maturity on 1-year zero-coupon bonds is currently 6.5%; the YTM on 2-year zeros is 7.5%. The Treasury plans to issu

e a 2-year maturity coupon bond, paying coupons once per year with a coupon rate of 8.5%. The face value of the bond is $100.
a. At what price will the bond sell? (Do not round intermediate calculations. Round your answer to 2 decimal places. Omit the "$" sign in your response.)
Price___$
b. What will the yield to maturity on the bond be? (Do not round intermediate calculations. Round your answer to 3 decimal places. Omit the "%" sign in your response.)
Yield to maturity__%
c. If the expectations theory of the yield curve is correct, what is the market expectation of the price that the bond will sell for next year? (Do not round intermediate calculations. Round your answer to 2 decimal places. Omit the "$" sign in your response.)
Price__$
d. Recalculate your answer to (c) if you believe in the liquidity preference theory and you believe that the liquidity premium is 1%. (Do not round intermediate calculations. Round your answer to 2 decimal places. Omit the "$" sign in your response.)
Price___$.
Business
1 answer:
alex41 [277]3 years ago
5 0

Answer:

1. PV = 101.87

2. YTM = 7.46%

3. Price of the bond  is $100.92

Explanation:

PV = 8.5/ (1.065) + 108.5/ (1.075)2

PV = 7.981 + 93.889

PV = 101.87

Part B:

PV = 101.870

FV = 100

N = 2

PMT = 8.5

Using Financial Calculator:

r = 7.459237

YTM = 7.46%

Part C:

The forward rate for next year, derived from the zero-coupon yield curve, is approximately:

(1 + forward Rate) = (1 + 0.075)2/ (1.065)

forward rate = 8.51%

Price of the bond = 108.5/ (1.0851)

Price of the bond = 100

Part D:

Interest Rate = 8.51% - 1% = 7.51%

Price of the bond = 108.5/ (1.0751)

Price of the bond = 100.92

You might be interested in
Which of the following is true regarding GASB's definition of the financial reporting entity?
Mashutka [201]

Answer:

d. All of the above are true

Explanation:

According to my research on the GASB's definition of the financial reporting entity, I can say that based on the information provided by the GASB website, all of the above statements provided are true. They can consists of many components such as joint ventures or jointly governed organizations, governments can be general purpose governments or special-purpose governments, and Blending is used.

I hope this answered your question. If you have any more questions feel free to ask away at Brainly.

7 0
3 years ago
Tri-coat Paints has a current market value of $50 per share with earnings of $5.97. What is the present value of its growth oppo
Gnesinka [82]

Answer: $0.25

Explanation:

Fron the question, we are informed that Tri-coat Paints has a current market value of $50 per share with earnings of $5.97. We are further told that the required return is 12%.

The present value of its growth opportunities (PVGO) will be:

= $50 - ($5.97/12%)

= $50 - ($5.97/0.12)

= $50 - $49.75

= $0.25

Therefore, the present value of its growth opportunities (PVGO) if the required return is 12% is $0.25.

6 0
3 years ago
A perfect hedge (full coverage) on translation exposure can usually be achieved when which of the following occurs? a. Using a f
attashe74 [19]

Answer:

e). None of the above, because a perfect hedge does not exist

A perfect hedge is nearly impossible

Explanation:

A perfect hedge is a position undertaken by an investor that would eliminate the risk of an existing position, or a position that eliminates all market risk from a portfolio. In order to be a perfect hedge, a position would need to have a 100% inverse correlation to the initial position.

At the time of taking an opposite position in Derivatives Market, Perfect Hedge would mean covering the risk involved in the Cash Market Position completely, i.e. 100%. 2. Imperfect Hedge: When the position in the cash market is not completely hedged or not hedged to 100%, then such a hedge is called Imperfect Hedge.

6 0
3 years ago
Seaside Company's manufacturing overhead is overallocated by $16,000. The following inventory account detail is provided
Mrac [35]

Answer:

b. $23,350

Explanation:

The computation of final balance in fatal work-in-process inventory is presented with the help of spreadsheet as attached below:-

The formula is presented below:-

Amount of Over-allocated Overheads = Percentage of overhead applied × Over-allocated Overheads

Account Balance after = Account Balance before - Amount of Over-allocated Overheads

Therefore the correct answer is b. that is $23,350

4 0
3 years ago
What should you expect to get from your insurance company in exchange for your premium?
Sergeu [11.5K]

Answer:

see below

Explanation:

Premiums are the regular payments the insured pays to the insurance company for insurance coverage. By paying premiums, the insurance company agrees to compensate the insured for any financial loss resulting from the risk covered by the insurance contract.

Premiums are the cost of insurance.  The customer pays premiums while the insurances undertake the risk stated in the policy documents. Should the customer suffer damages, injuries, or financial loss, the insurance companies compensate the customer as per the terms stated in the insurance contract.

5 0
3 years ago
Other questions:
  • 1. Of the 540 seniors at Lake City High School, 35% are going on a school trip. If the buses ordered for the trip seat 42 studen
    12·1 answer
  • George offers to sell his car to Suzy for $10,000 on the coming Sunday, to which Suzy agrees. They write down the details on a p
    7·1 answer
  • Write 7÷10, 1÷3, 7÷12 and 8÷10 in order from least to greatest ​
    7·1 answer
  • 15Question(1 point) 1st attempt What will happen in a market where a nonbinding price floor is removed? Choose one:
    8·1 answer
  • Small percentage changes in an amount from a company's financial statement may still represent large dollar amounts; therefore,
    12·1 answer
  • A trader sold short a cotton futures contract @ 76.12 cents per pound. The contract size is 50,000 pounds. How much does the tra
    8·1 answer
  • Fitbit makes health and fitness tracking devices. some buyers want very basic fitness tracking such as steps taken and calories
    5·1 answer
  • When the company pays rent expense for the current month, what is the effect on the accounting equation for that company?
    12·1 answer
  • Tanner-UNF Corporation acquired as a long-term investment $300 million of 6% bonds, dated July 1, on July 1, 2021. Company manag
    5·1 answer
  • In your own words define the term accounting and its usage.
    12·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!