Answer:
The pound's forward discount or premium is 3.74%
Explanation:
The current spot rate is 1 Pound = $2
The interest rate parity exists, then:
The forward rate:
1 Pound*1.07 = $2*1.11
1.07 Pound = $2.22
1 pound = $2.0748
The Premium in Pound = $2.0748 - $2
= $0.0748
Premium rate = $0.0748/$2*100
= 3.74%
Therefore, The pound's forward discount or premium is 3.74%
Answer:
False
Explanation:
It is FALSE that If you make superior returns by buying stocks after a 10% fall in price and selling stocks after a 10% rise, this is consistent with the weak form of EMH.
Weak Form of Efficiency Market Hypothesis states that individuals cannot use past knowledge, facts, or occurrence about stock to determine its future price.
In other words, past data or evidence has no connection with existing market prices.
Hence, if you make superior returns by buying stocks after a 10% fall in price and selling stocks after a 10% rise, that shows the existence of pattern or past information about the stock rising or falling prices determine future occurrence. This situation contradicts the Weak form of EMH
Answer
329,245.19
The answer and procedures of the exercise are attached in the following archives.
Explanation
You will find the procedures, formulas or necessary explanations in the archive attached below. If you have any question ask and I will aclare your doubts kindly.
Answer:
a) Bond A's current yield is greater than that of Bond B.
TRUE As every other alternative as been proveed incorrect
Also, this satement refers to the amount stated in the coupon rate.
Explanation:
c) Bond A trades at a discount, whereas Bond B trades at a premium.
FALSE
A trades as premium as thei coupon rate is higher than market value so investor are willing to purchase at a hihger price until achieve the 8% return
d) If the yield to maturity for both bonds remains at 8%, Bond A's price one year from now will be higher than it is today, but Bond B's price one year from now will be lower than it is today.
FALSE As A is traded at premium it will decrease over time to match the face value
e) Bond A's capital gains yield is greater than Bond B's capital gains yield.
FLASE As Bond A will decrease their price over time it will make capital losses.
