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3 years ago

How does Corona Virus affect Purchasing Power Parity globally?

Business

1 answer:

sammy [17]3 years ago

5 0

Answer:

CV19 could impact PPP by negatively impacting the market value of goods in an economy that is severely impacted by the virus.

Explanation:

When the economic conditions and demand for goods and services slow down, prices will naturally fall as the individuals selling those goods and services try to attract scarce buyers.

In the case of CV19, if one country is severely impacted by either illness or the measures taken to avoid illness, their economy will slow down and prices will fall. Compared to a country who is not impacted and whose market prices do not fall, PPP between these countries will be affected.

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The YTM on a 2 year zero coupon bond is 5% and the YTM on a 1 year zero coupon bond is 3%. What does the no-arbitrage condition

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Answer:

$111.11 or 111.11% of face value

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Assuming the face value of $100 for all bonds (without loss of generality)

If the two year coupon bond is repackaged as a one year zero coupon bond paying $12 after one year and another two year bond paying $112 after 2 years, the price of the two zero coupon bonds are given as

Price of one year Zero coupon bond = 12/1.05 = $11.43 (one year ZCB has YTM of 5%)

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So, one can sell the repackaged bonds at a price = $11.43+ $99.68 = $111.11 or 111.11% of face value

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3 years ago

How does Corona Virus affect Purchasing Power Parity globally?​

How does Corona Virus affect Purchasing Power Parity globally?