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Helga [31]
3 years ago
6

Suppose the interest rate on a 1-year T-bond is 5.00% and that on a 2-year T-bond is 7.00%. Assume that the pure expectations th

eory is correct, what is the market's forecast for 1-year rates 1 year from now
Business
1 answer:
Tasya [4]3 years ago
5 0

Answer: 9.04%

Explanation:

1 year rate today = 5% = 0.05

2 years rate today = 7% = 0.07

Maturity of longer bond = 2

The ending return if the 2 years bond are bought will be thesame as the needed return on series of a year bond which will be 1.1449

The market's forecast for 1-year rates 1 year from now will be calculated as:

= 1.05(1+X) = 1.1449

1.05 + 1.05X = 1.1449

1.05X = 1.1449 - 1.05

1.05X = 0.0949

X = 0.0949/1.05

X = 0.090381

X = 9.04%

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Answer:

BEP : 500 units

Profits : R2000

Explanation:

BEP or break-even point = fixed costs/ contribution margin per unit.

Fixed costs = R2000

Contribution margin per unit = selling price - variable costs

Contribution margin per unit = R12- R8 =R4

BEP = 2000/4

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profits will be the units sold after BEP x contribution margin

=1000-500

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profits will be

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8 0
3 years ago
Interest rates on 4-year Treasury securities are currently 5.4%, while 6-year Treasury securities yield 7.65%. If the pure expec
Fudgin [204]

Answer:

12.3%

Explanation:

In this question, we are asked to calculate what is believed a 2-year market security will be yielding, 4 years from now

To calculate this, we proceed mathematically;

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2 year yield 4 years from now = 0.123

2 year yield 4 years from now = 12.3%

8 0
3 years ago
The previous graph you constructed should show that net exports from Japan would be negative if the price of yen increased to a
lubasha [3.4K]

Answer:

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2 years ago
When the interest rate increases, the opportunity cost of holding money Group of answer choices increases, so the quantity of mo
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An increase in the interest rate increases the opportunity cost of holding money and leads to a reduction in the quantity of money demanded

<h3>What is opportunity cost ?</h3>

The opportunity cost of a particular activity option in microeconomic theory is the loss of value or benefit that would be incurred by engaging in that activity, as opposed to engaging in an alternative activity that offers a higher return in value or benefit.

The value of the next best alternative or option is referred to as the opportunity cost. This value may or may not be monetary. Value can also be measured using other criteria such as time or satisfaction. One formula for calculating opportunity costs could be the ratio of what you give up to what you gain.

To know more about opportunity cost follow the link:

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​an automobile manufacturing company has developed an electric car that uses sunlight to charge itself during movement. this new
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