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3 years ago

What type of security can be used to minimize both the risks for an investor with a fixed investment horizon? Explain.

Business

1 answer:

Hatshy [7]3 years ago

8 0

Answer:

Zero coupon Treasury bond with a duration equal to the investors investment horizon.

Explanation:

Zero coupon Treasury bond is also called Treasury Zero and the face value of the bond is paid on maturity.

They do not pay interest periodically or coupon payment. Thus the name zero coupon.

This is in contrast to other bond types that make periodic payment of interest and then recieved face value at maturity.

Zero coupon Treasury bond minimises risk for the investor because the government always pays it's obligations.

The agreed value at maturity is not subject to market forces and other economic factors.

In this scenario when the zero coupon treasury bond has the same duration as investor investment horizon it minimises his risk compared to other bond types

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The earnings of two employees are given below: employee a: 6% commission on all sales employee b: 4% commission on the first $80

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Employee A makes $1,200 more than Employee B for sales of $100,000.

The earnings of Employee A are: = Commission rate x Sales

= 6% x 100,000

= $6,000

The earnings of employee B are = Commission on first $80,000 + Commission on anything above $80,000

= (4% x 80,000) + (8% x (100,000 - 80,000)

= 3,200 + (8% x 20,000)

= $4,800

The difference is: = Employee A commission - Employee B commission

= 6,000 - 4,800

= $1,200

In conclusion, Employee A makes $1,200 more than Employee B for sales of $100,000.

Commission Rate :

The commission rate is the percentage or fixed payment associated with a certain amount of sale. For example, a commission could be 6% of sales, or $30 for each sale.

Learn more about Commission rate :

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1. Does the concept of comparative advantage apply to individuals, countries, or both? Explain.

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Explanation:

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$80,000 in raw materials were purchased on account. $78,000 in raw materials were used in production. Of this amount, $68,000 wa

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Explanation:

The journal entries are shown below:

1. Raw material A/c Dr $78,000

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To Factory Equipment $194,000

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