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brilliants [131]
3 years ago
11

If the company were to issue an annual zero-coupon bond with a maturity of 2 years and par value of $1,000, what would be the ar

bitrage-free price of that bond?
Business
1 answer:
Firdavs [7]3 years ago
3 0

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

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Esteem needs are the highest level in Maslow's hierarchy of needs. True False
Anit [1.1K]

Answer:

False

Explanation:

Maslow's hierarchy of needs is a motivational theory which passes through five types of needs that are presented below:

1. Physiological needs: These are the needs which are for survival i.e food, cloth, home, air

2. Safety needs: This need represents security and safety with respect to personal, financial, etc.  

3. Social needs: These needs depicts that an individual is interested in social groups or not. It helps the person not to feel isolated, alone, etc

4. Esteem needs: The esteem needs represent the respect he or she getting  

5. Self-actualization needs: As the name suggests, it is self-actualizing so that the person gets to know about his potential

The chart shows from 5 to 1 i.e self actualization to physiological needs

7 0
3 years ago
The subject has $8,000 pool and a $2,000 chimney but no porch. a comparable that sold for $199,000 has a $3,000 porch but no poo
Pavel [41]
<span>If the comp sold for $199,000 but includes a $3000 porch and the subject has no porch, then we subtract the value of the porch to yield a base for the comparable of $196,000. Then, since the comparable has no pool or chimney, we add these values - $8,000 and $2,000, respectively - to that base value to yield an adjusted value of $196,000 + $8,000 + $2,000 = $206,000.</span>
5 0
3 years ago
John works for Heinlein Hillclimbers in Wyoming, where he earns $26,500 annually. He contributes $150 per month to his 401(k), o
otez555 [7]

Answer: $40,710

Explanation:

John's annual compensation includes his actual annual salary as well as the various payments that Heinlein Hillclimbers makes on his behalf.

His total annual compensation is:

= Annual salary + Employer's 401 contribution + Health insurance + Life insurance + AD&D + Profit sharing bonus + Tuition reimbursement + employer only taxes and insurance

= 26,500 + (150 /2 * 12 months) + (150 * 12 months) + (30 * 12 months ) + (50 * 12 months ) + (2% * 26,500) + 5,250 + (18% * 26,500)

= 26,500 + 900 + 1,800 + 360 + 600 + 530 + 5,250 + 4,770

= $40,710

4 0
2 years ago
Consider the relationship between monopoly pricing and the price elasticity of demand. If demand is inelastic and a monopolist__
miss Akunina [59]

Answer:

raises;larger;decrease;always.

Explanation:

Consider the relationship between monopoly pricing and the price elasticity of demand. If demand is inelastic and a monopolist raises its price, quantity would fall by a larger percentage than the rise in price, causing profit to decrease. Therefore, a monopolist will always produce a quantity at which the demand curve is elastic because he or she will be maximizing profits.

A monopolistic market is a type of market structure that is typically characterized by a single supplier or seller of a particular product without any competition from any other in the market. The features of a monopolistic market are;

- Single seller.

- Profit maximizer.

- Price maker.

- High barriers to entry for others.

- Price discrimination.

- No close substitutes or competition.

3 0
3 years ago
Ramon incorporated his sole proprietorship by transferring inventory, a building, and land to the corporation in return for 100
olasank [31]

Answer:

Ramon’s basis in the stock he receives in his corporation is $84,000

Explanation:

The computation of Ramon’s basis in the stock received in his corporation would be $84,000 as this amount reflect the adjusted basis of the assets transferred to the corporation.  

These assets include inventory, building, and land. So, the total amount of the total assets would be received i.e based on an adjusted basis, not the fair market value  

6 0
2 years ago
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