Answer:
Explanation:
The current price of the bond can be calculated by using the formula:
Answer:
1. Real risk-free rate.
2. Nominal risk free-rate.
3. Inflation premium.
4. Liquidity risk premium.
5. Liquidity risk premium.
6. Maturity risk premium.
Explanation:
Market interest rates can be defined as the amount of interests (money) paid by an individual on deposits and other financial securities or investments. The factors that typically affect the market interest rate known as the determinant of market interest rates are;
1. This is the rate on short-term U.S. Treasury securities, assuming there is no inflation: Real risk-free rate r*
2. It is calculated by adding the inflation premium to r*: Nominal risk free rate.
3. This is the premium added to the real risk-free rate to compensate for a decrease in purchasing power over time: Inflation premium.
4. This is the premium added as a compensation for the risk that an investor will not get paid in full: Liquidity risk premium.
5. This premium is added when a security lacks marketability, because it cannot be bought and sold quickly without losing value: Liquidity risk premium.
6. This is the premium that reflects the risk associated with changes in interest rates for a long-term security: Maturity risk premium.
Answer:
b
Explanation:
An example of credit is when a person borrows money from a finance company to buy a car. Once credit is extended to a person and is used for a purchase, the credit is converted to a debt, and the person has the financial obligation to repay the loan.
Answer: $75
Explanation:
Using the Gordon Growth Model:
Price of stock = Next year dividend / (Required return - growth rate)
Growth rate is 0% as dividend does not change per year.
Price of stock = 6 / 8%
= $75
Merchandise 7X, the "secret ingredient" or "secret formula" in Coca-Cola. The ingredient has remained a secret since its invention in 1886 by John Pemberton.
