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The yield to maturity (YTM) on 1-year zero-coupon bonds is 7% and the YTM on 2-year zeros is 8%. The yield to maturity on 2-year

Vikentia [17]

Answer:

(a) The arbitrage strategy is to buy zeros with face values of $140 and $1,140 and respective maturities of one and two years, and simultaneously sell the coupon bond.

(b) The profit on the activity equals $0.72 on each bond.

Explanation:

The price of the coupon bond = 140 × PV(7.9%, 2) + 1000 × PV(7.9%, 2)

= 140 × (1-(1/1.079)^2)/0.079 + 1,000/1.079^2

= $1,108.93

If the coupons were withdrawn and sold as zeros individually, then the coupon payments could be sold separately on the basis of the zero maturity yield for maturities of one and two years.

[140/1.07] + [1,140/1.08^2] = $1,108.21.

The arbitrage strategy is to buy zeros with face values of $140 and $1,140 and respective maturities of one and two years, and simultaneously sell the coupon bond.

The profit on the activity equals $0.72 on each bond.

7 0

3 years ago

Complete the statement by filling in the correct terms.

Setler79 [48]

1= A. Balancing a back account
2= B. bank statement

8 0

3 years ago

Read 2 more answers

Your business has purchased 500 pizza pans, 60 kg of sauce, 100 kg of cheese, 2.5 kg of basil, 2.5 kg of oregano, 5 kg of yeast,

adelina 88 [10]

Answer:

400 pizzas

Explanation:

The complete question would be:

You are going into the business of making pizzas. The following is the list of ingredients to make ONE pizza:

400 g flour 50 mL water

10 g yeast 120 g sauce

250 g cheese 5 g oregano

5 g basil

Your business has purchased 500 pizza pans, 60 kg of sauce, 100 kg of cheese, 2.5 kg of basil, 2.5 kg of oregano, 5 kg of yeast, and 200 kg of flour. You have as much water as you need. How many pizzas can you make?

You are going to have to make a couple of conversions to do this. Since everything you need is indicated in grams, we first need to convert everything you have in grams.

There are 1,000 g in 1 kg. So now we convert them all:

60 kg of sauce

$60kg \times \dfrac{1,000g}{1kg} = 60,000g$

100 kg of cheese

$100kg \times \dfrac{1,000g}{1kg} = 100,000g$

2.5 kg of basil

$2.5kg \times \dfrac{1,000g}{1kg} = 2,500g$

2.5 kg of oregano

$2.5kg \times \dfrac{1,000g}{1kg} = 2,500g$

5 kg of yeast

$5kg \times \dfrac{1,000g}{1kg} = 5,000g$

200 kg of flour

$200kg \times \dfrac{1,000g}{1kg} = 200,000g$

So now that we know what we have, we determine how many pizzas we can make with the amount of each ingredient. We get the ratio of each ingredient to one pizza to determine how many we can make:

Flour:

Available: 200,000g

Needed: 400g

$200,000g\ of\ flour\times\dfrac{1\ pizza}{400g\ of\ flour} = 500\ pizzas$

Yeast:

Available: 5,000g

Needed: 10g

$5,000g\ of\ yeast\times\dfrac{1\ pizza}{10g\ of\ yeast} = 500\ pizzas$

Cheese:

Available: 100,000g

Needed: 250g

$100,000g\ of\ cheese\times\dfrac{1\ pizza}{250g\ of\ cheese} = 400\ pizzas$

Basil:

Available: 2,500g

Needed: 5g

$2,500g\ of\ basil\times\dfrac{1\ pizza}{5g\ of\ yeast} = 500\ pizzas$

Sauce:

Available: 60,000g

Needed: 120g

$60,000g\ of\ sauce\times\dfrac{1\ pizza}{120g\ of\ sauce} = 500\ pizzas$

Oregano:

Available: 2,500g

Needed: 5g

$2,500g\ of\ oregano\times\dfrac{1\ pizza}{5g\ of\ oregano} = 500\ pizzas$

We do not need to consider water, because it will provide as many as we will need.

So here we see that all but one ingredient is able to yield 500 pizzas. Cheese is the only one that yields less than 500, specifically 400 only. This is your limiting ingredient and this ingredient determines how many pizzas you can make. Because when you run out of cheese, you can no longer make a pizza.

4 0

3 years ago

As flat screen tvs enter the maturity stage, what could happen to profits for individual firms?

Maslowich

The profits will peak and decline.
during this stage of the product development, the product is already widely accepted by the market.
Eventually, the newer and better product will start to appear and the previous one will started to lose popularity and decline in profits.

8 0

3 years ago

Suppose that the market for computers is dominated by a single firm, like Dell, that is able to exert influence over prices and

Salsk061 [2.6K]

Answer:

many buyers and sellers

Explanation:

Based on the information provided within the question it can be said that this situation violates the perfect competition assumption of many buyers and sellers. This is a model that many buyers and sellers in a competitive market agree on a single market price, and that no individual has influence over the price. Therefore if a single company, like Dell in this scenario, is able to influence the price then it is violating this assumption.

8 0

3 years ago