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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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You are given the following information concerning a noncallable, sinking fund debenture: Principal: $1,000 Coupon rate of inter

Oliga [24]

Answer:

Capital loss of $257.38

Explanation:

Use the following formula to calculate the capital gain or (loss).

Capital Gains / (Loss) = Current Price - Purchase price

As two year have been passed and we need to calculate the current price of the debenture using the following formula

Use the following formula to calculate the price of the bond

Price of the bond = [ C x ( 1 - ( 1 + r )^-n ) / r ] + [ F / ( 1 + r )^n ]

Where

F = Face value = $1,000

C = Periodic coupon payment = 7% x $1,000 = $70

r = Periodic interest rate = 13%

n = Numbers of periods = 15 years - 2years = 13 years

Placing values in the formula

Price of the bond = [ $70 x ( 1 - ( 1 + 13% )^-13 ) / 13% ] + [ $1,000 / ( 1 + 13% )^13 ]

Price of the bond = $538.46 + $204.16 = $742.62

Purchase price = $1,000

Placing values in the capital gain or (loss) formula

Capital Gain / ( Loss ) = $742.62 - $1,000

Capital Gain / ( Loss ) = ($257.38)

7 0

3 years ago

Tript Corporation has a process costing system and uses the weighted-average method. The company had 3,000 units in work in proc

Alekssandra [29.7K]

Answer:

11,600 units

Explanation:

Equivalent units for conversion costs :

Equivalent units = 10,000 x 100 % + 4,000 x 40 % = 11,600

The equivalent units for February for conversion costs were: 11,600 units

6 0

3 years ago

The following inventory information was taken from the records of Kleinfeld Inc.: Historical cost $12,000 Replacement cost $7,00

irga5000 [103]

Answer:

the inventory should be recorded at $8,500

Explanation:

As we know that according to GAAP, the inventory should be recorded at a cost or net realizable value whichever is lower

So as per the question

Historical cost is $12,000

And, the net realizable value is

= Expected selling price - expected selling cost

= $9,000 - $500

= $8,500

So, the lower cost is $8,500

Hence, the inventory should be recorded at $8,500

5 0

4 years ago

Which is not capital?

KiRa [710]

C Is The Answer I Just Took This My E2020.

6 0

3 years ago

Tanning Company analyzes its receivables to estimate bad debt expense The accounts receivable balance is $300 000 and credit sal

pentagon [3]

Answer: Bad Debt Expense 28,000 Allowance for Doubtful Accounts 28,000

Explanation:

Account receivable = 300,000

Percentage uncollectible = 10%

Current balance = 2000

Adjustment to allowance for uncollectible accounts is given by :

(Account receivable ×percentage uncollectible) - current balance

(300,000 × 10%) - 2000

(300,000 × 0.1) × 2000

30,000 - 2000 = 28,000

Therefore, adjustment should be :

bad debt expense debit 28,000

allowance for doubful account credit 28,000

6 0

4 years ago