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
spin [16.1K]
3 years ago
13

To create a portfolio with duration of 4 years using a 5 year zero-coupon bond and a 3 year 8% annual coupon bond with a yield t

o maturity of 10%, one would have to invest ________ of the portfolio value in the zero-coupon bond.
Business
1 answer:
vovikov84 [41]3 years ago
5 0

Answer:

One would have to invest 55%

Duration of 3-year bond is 2.78

Then 5wZ + 2.78(1 - wZ) = 4

2.22wZ = 1.22

wZ = .5495

Explanation:

To properly understand the concept behind the above calculation, let us define some basic concept:

Portfolio:  This can be refereed to as a phrase in finance. It refers to the collection on investment that is being held by an investment company, a financial institution such as a bank ,persons or an individual.

Zero coupon bond: A zero-coupon bond is a bond where the nominal or return on investment (ROI)  value is repaid at the time of maturity. This definition usually reflects a positive time value of money.

We should also recall that the formula for zero coupon bond as:

price = M / (1 + i)^n

where: M = maturity value

i = required interest yield divided by 2

Applying this formula, we were able to arrive at the investment percentage.

You might be interested in
Which type of marketing intermediary are sales representatives of manufacturers and wholesalers?
Len [333]

Answer:

C. Agents

Explanation:

They are sales representatives for manufacturers or wholesalers and usually are hired on a commission basis.

6 0
2 years ago
To the following:
vlabodo [156]
Generous- Selfish
Tremendous- Small
Famous- Unknown
Publicity- Secrecy
Imaginative- Unskillful
Outstanding-Unexceptional
7 0
3 years ago
A Municipal Finance Professional (MFP) lives in State A. The MFP gives $200 to the election campaign of a personal friend who is
Darya [45]

Answer:

B The payment will not result in the employing firm being banned from doing municipal securities business with State B because it was made based on a personal relationship.

Explanation:

The rule of de minimis applies to persons making donations to candidates vying for elective positions.  $250 de minimis is applicable to a person who will vote for a candidate in an election.  If a person will not vote for the candidate, the de minimis is $150.

In this case, the MFP will not be voting for the candidate.  She is allowed to donate only $150.  Any excess will be refunded.  However, since the MFP is making the donation on his personal capacity, the firm as a separate entity will not be penalized for what the MFP does with her money.  It is likely that the firm does not even do contracts with the municipality.  However, they are not based in the same area.

8 0
3 years ago
Suppose a farmer in georgia begins to grow peaches. he uses​ $1,000,000 in savings to purchase​ land, he rents equipment for ​$8
daser333 [38]
<span>The farmer is better off being a farmer. After 1 year the farmer will have made 900,000 off of 300,000 baskets. Minus the lease of land and payment of workers, the farmer will have over 650,000. Leave that in the bank and do it another year, interest at 22% would net around 147,000. Add that to 650kx2. That equals a little over 1.4 million. So in closing, farmer is more lucrative than shoe salesman.</span>
7 0
3 years ago
If you believe in the ________ form of the EMH, you believe that stock prices reflect all relevant information including histori
Alex

Answer:

A)semistrong

Explanation:

As regards to finance, the efficient-market hypothesis known as "EMH"

gives assertion that financial markets can be regards as "informationally efficient. ”

The EMH three forms which are:

1)weak

2) semi-strong

3)strong

it gives evaluation of the influence that MNPI(material Nonpublic Information ) has on market prices. It explains that when markets are efficient then the current prices reflect all information.

Semi-strong-form give a claim that prices gives reflection of all publicly available information, it also claims that

that prices instantly change to to gives a reflection of new public information.

The weak-form gives a claim that prices that is on traded assets such as bonds or stock gives reflection of

all publicly available information in the past . It should be noted that If you believe in the semistrong form of the EMH, you believe that stock prices reflect all relevant information including historical stock prices and current public information about the firm, but not information that is available only to insiders.

3 0
2 years ago
Other questions:
  • On January 1, 2019, $40 million face amount of 5%, 20-year bonds were issued. The bonds pay interest on a semiannual basis on Ju
    10·1 answer
  • The Plastics Division of Weston Company manufactures plastic molds and then sells them for $70 per unit. Its variable cost is $3
    9·1 answer
  • Suppose that in a year an American worker can produce 100 shirts or 20 computers and a Chinese worker can produce 100 shirts or
    15·1 answer
  • Look at the picture, which one is the correct answer?
    12·1 answer
  • Sometimes a country’s laws forbid foreigners from owning a business in the nation. In the presence of such laws, a(n) ________ i
    7·1 answer
  • Saving some private time for yourself and learning to pigeon hole problems are two examples of
    15·2 answers
  • If you see a large group of stranded passengers standing next to a disabled bus, and you have only three seats in your car, deci
    11·1 answer
  • A firm has total debt of $1,360 and a debt-equity ratio of 0.21. What is the value of the total assets
    8·1 answer
  • If Karla spent $200 on Wednesday to have the windows in her building washed, recorded the
    7·1 answer
  • Silviocoto say hi plz do it
    11·2 answers
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!