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Mamont248 [21]
3 years ago
9

You observe the following term structure: Effective Annual YTM 1-year zero-coupon bond 5.2 % 2-year zero-coupon bond 5.3 3-year

zero-coupon bond 5.4 4-year zero-coupon bond 5.5 a. If you believe that the term structure next year will be the same as today’s, calculate the return on (i) the 1-year zero and (ii) the 4-year zero.
Business
1 answer:
Lisa [10]3 years ago
8 0

Answer:

Explanation:

a. If you believe that the term structure next year will be the same as today’s, calculate the return on (i) the 1-year zero and (ii) the 4-year zero.

b. Which bond provides a greater expected 1-year return? O 1-year zero-coupon bond O 4-year zero-coupon bond

The return on one year bond is = 5.2%

The price of 4 year bond today

=\frac{ 1000}{ (1.055)^4}

Price of 4 year bond today = 807.22

If yield curves is unchanged, the bond will have 3-year maturity and price will be

=\frac{  1000}{(1.054)^3}

If yield curves is unchanged, the bond will have 3-year maturity and price will be = 854.04

Return

=\frac{ (854.04 - 807.22)}{807.22}

Return = 5.8%

The longer term bond has given the higher return in this case at it's YTM fell during the holding period(4 -year)

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The correct option is C

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Suppose that lenders want to receive a real rate of interest of 5 percent and that they expect inflation to remain steady at 2 p
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Answer:

7%

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nominal interest rate = 5% + 2% = 7%

Usually the nominal interest rate has four major components:

  1. real interest rate: the net interest rate received by a lender or an investor
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Two types of cars (Deluxe and Limited) were produced by a car manufacturer last year. Quantities sold, price per unit, and labor
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Answer:

The labor productivity  for Deluxe and Limited cars are as follows:

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Limited Car  0.21   156.54  

Explanation:

It is noteworthy that labor productivity in terms of units/hour does not put into consideration  quality of product, selling prices and skill level of the manufacturing workers. It would extremely  difficult for supervisors to find  out the workers that are better in terms of unit/hour.

Find attached spreadsheet with detailed calculation and formulas used.

Download xlsx
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Customer value refers to: a. The need of a customer to receive the highest quality product at the lowest possible price.b. The l
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Answer:

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Customer value refers to the unique combination of benefits received by targeted buyers that includes quality, convenience, on-time delivery, and both before-sale and after-sale service at a specific price

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