All categories

3 years ago

A simple optimal portfolio problem is the cash matching problem.

Business

1 answer:

liraira [26]3 years ago

5 0

Answer:

The units of the 5-year zero coupon bond that should be purchased in the optimal portfolio is:

= 6 units

Explanation:

a) Data and Calculations:

Spot rates = 5% annually

Yield of a 1-year zero coupon bond = 5%

Yield of a 2-year zero coupon bond = 5%

Yield of a 3-year zero coupon bond = 5%

Yield of a 4-year zero coupon bond = 5%

Yield of a 5-year zero coupon bond = 5%

Yield of a 6-year up to a 10-year zero coupon bond = 5%

Future Monetary Obligations:

YEAR 1 2 3 4 5 6 7 8 9 10

OBLIGATION 100 200 300 400 500 600 700 800 900 1000

PV factor 1.05 1.1025 1.1576 1.2155 1.2763 etc.

Present value of a 5-year zero coupon bond = $78.35 ($100/1.2763)

Number of units of the 5-year zero coupon bond that should be purchased in the optimal portfolio = 6.382 ($500/$78.35)

= 6 units

You might be interested in

The cost of land includes all of the following except:___.

lana [24]

Answer:

The answer is D.

Explanation:

The correct option is D. -The cost of fencing and lighting is not part of the cost of land. Why? - Because this is the cost to improve land.

Option A is wrong. Cost of levelling and grading is part of the cost of land

Option C is wrong. Purchase price is the main cost in the determining the cost of land

Option D is also wrong

6 0

4 years ago

An office building with an adjusted basis of $320,000 was destroyed by fire on December 30, 2013. On January 11, 2014, the insur

STALIN [3.7K]

Answer:

i. $40,000

ii. $410,000

iii. 180 days after July 12, 2015

Explanation:

i. The taxpayer's recognized gain is $40,000 ($450,000 -$410,000). The cost of the new office - the amount received from the insurance company.

ii. The taxpayer's basis for the new office is the cost of purchasing the new office building which is $410,000.

iii. Taxpayers can qualify for deferral treatment if they reinvest proceeds into a QOF (Qualified Opportunity Funds) within 180 days of receiving the gain. Because the new office was purchased on July 12, this is the applicable date.

6 0

4 years ago

15. Your company contracted for a 30-second commercial (an advertisement) that aired during the Super Bowl at a cost of $1.2 mil

Diano4ka-milaya [45]

Answer: D) It increases liabilities and decreases stockholders' equity by $1.2 million each.

Explanation:

Even though the company has not paid for the advertisement, the expense has already been incurred and by the Accrual principle of accounting it needs to be recorded.

It will therefore be recorded as an expense which will reduce the Income for the year which is a Stockholder equity account so therefore it will reduce the Stockholder account by $1.2 million.

Because the company has not yet paid for the advert, the amount have to be recorded as a liability to the company so liabilities will increase by $1.2 million.

4 0

3 years ago

To have a monopoly, barriers to entering the market must be so high that no other firms can enter. Do network externalites crea

luda_lava [24]

Answer: Option D

Explanation: Network externalities are indeed an economic principle that defines the conditions in which a product or service's value increases or decreases as the number of customers increases or declines.

As the availability of an item raises the price of the product falls it becomes less valuable, according to the traditional economic theory. This is termed "positive externalities of the network" or "network influence."

Thus, somehow it creates barriers for other firms by prepairng a strong customer base for an experienced firm.

8 0

3 years ago

When a firm issues 50,000 shares with a par value of $5 for $22 per share, additional paid-in capital will:

Aloiza [94]

Answer:

The additional paid-in capital will increase by $850,000

Explanation:

Additional paid up capital: It is that paid up capital which is excess of par value. It is mentioned in the balance sheet when new shares is issued.

The computation of additional paid up capital are shown below:

= Difference of per share price × Number of shares

where,

difference = $22 - $5 = $17

So, the value equals to

= $17 × 50,000

= $850,000

So, the additional paid-in capital will increase by $850,000

6 0

3 years ago