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Archy [21]
3 years ago
8

The yield to maturity on a bond is the interest rate you earn on your investment if interest rates do not change. If you actuall

y sell the bond before it matures, your realized return is known as the holding period yield. Suppose that today you buy a coupon bond with 9 percent annual interest for $1,000. The bond has 12 years to maturity. Three years from now, the yield to maturity has declined to 7 percent and you decide to sell. What is your holding period yield?
Business
1 answer:
koban [17]3 years ago
3 0

Answer:

The answer is 12.83%.

Explanation:

We have the below calculations:

- Coupon payment = 1,000 x 9% = $90;

- Purchasing price = $1,000;

- Price sold after 3 years is equal to the present value of 9  annual coupon payments plus face value repayment after 9 years, discounted at YTM at the time of sell at 7%;

=> Price after 3 year = (90/0.07) x ( 1- 1.07^-9) + 1,000/1.07^9 = $1,130.3;

The holding period yield (HPY) is the discount rate that equalizes cash flow from 3 years of holding the bond to its original purchased price:

1,000 = (90/HPY) x [1 - (1+HPY)^-3] + 1,130.3/ (1+HPY)^3 <=> HPY = 12.83%.

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Answer:

<u>Opportunities</u>

Faster and more information

When information is bountiful and disseminated speedily, investors are more confident that the financial system is strong and will be more likely to invest.

Liquidity,

Investors love being able to change their assets to physical money as soon as possible. If this is hard in a country, they will not invest.

Change in government restrictions

When Government restrictions that limit opportunities are lifted, investors come in larger numbers to take advantage of these new opportunities.

<u>Risks </u>

Financial services outside of regulation

Investors would prefer that the law is able to protect their assets and so will shun opportunities outside regulation.

Hot money

If there is too much Hot money going in and out of the economy, investors will be worried that too much money could leave the country at the slightest change in interest rates.

Information gap

Information should be widely available. If it is usually concealed from international partners, this can damage portfolios.

Interrelated international capital market

Independent Capital markets are able to withstand problems going on in other capital markets. When a nation's capital market is too interrelated with others this is risky.

Reducing risk reduction

A nation acting to reduce measures that reduce risk is a red flag. Investors want the least risky asset for a certain amount of return.

3 0
3 years ago
When a factory is operating in the short run,
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Answer:

B. it cannot adjust the quantity of fixed inputs

Explanation:

The short run is the conceptual time period where at least one factor of production is fixed in amount while other factors are variable in amount.

Fixed costs have no impact on a firm's short run decisions

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3 years ago
What was a major result of Henry Ford's innovative manufacturing technique?
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A store has 100 bathing suits of a certain style that go on sale from April 1 and wants to sell all of them by the end of June.
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Answer:

Predictive research.

Explanation:

Descriptive research focusses on the characteristics of the data under observation and then research is carried out by keeping those characteristic as main focus.

Predictive research focus on the analytics of the data and statistical figures. It is used in business modelling and data mining.

Prescriptive research is a type of research for problems. This usually focusses on the measures so that problems do not occur again.

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A company did a comprehensive examination of how pit crews in an auto race work to quickly get a racecar into the pit area, gas
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