Answer:
Best estimate of the current stock price= $42.64
Explanation:
Price of the stock today = .
where P2 =
D0=$1.75
D1=$1.75(1.25)
D2=$1.75(1.25)(1.25)
D3=$1.75(1.25)(1.25)(1.06)
Price of the stock today = . = $42.64
For each of the items listed below, indicate whether the item would be reported in the
1 answer:
Answer:
Note: The complete question is attached below as picture
Indication of how they should be reported are as follow:
1) Budgetary Schedules : FINANCIAL SECTION AS RSI (RSI)
2) Letter of Transmittal : INTRODUCTORY SECTION (I)
3) Legal debt limitations and debt margin : STATISTICAL SECTION (S)
4) A description of government's financial conditions : FINANCIAL SECTION AS MD&A (MDA)
5) Property tax collection and levy information : STATISTICAL SECTION (S)
6) Defined benefit pension plan schedules : FINANCIAL SECTION AS RSI (RSI)
7) Financial highlights of the fiscal year : FINANCIAL SECTION AS MD&A (MDA)
8) Auditors report : FINANCIAL SECTION (F)
9) 10-year data trend : STATISTICAL SECTION (S)
10) Notes to the financial report : FINANCIAL SECTION (F)
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Answer:
Note: <em>The complete question is attached as picture below</em>
1a. The one year spot rate can be calculated using the one year zero bond.
PV * (1 + S1) = FV
1 + S1 = 1000 / 900
S1 = 1.1111 - 1
S1 = 0.1111
S1 = 11.11%
1b. PV of the 2 year bond = $950
Annual coupon = 1000 * 5% = $50
950 = 50 / (1 + S1) + (50 + 1000) / (1 + S2)^2
950 = 50 / 1.1111 + 1,050 / (1 + S2)^2
1,050/ (1 + S2)^2 = 950 - 45 = 905
(1 + S2)^2 = 1050 / 905
1 + S2 = 1.160221/2
S2 = 7.714%
1c. Price of the 2 year zero bond = 1,000 / (1 + 0.07714)^2
Price of the 2 year zero bond = 1,000 / 1.1602
Price of the 2 year zero bond = 861.9203586
Price of the 2 year zero bond = $861.92
