Computation of yield from investment

Assignment Help Finance Basics

Reference no: EM1311232

Computation of yield from investment.

1. Suppose the price of a 2-year Treasury strip is $950 and the price of a Ford zero-coupon note of a similar maturity is $900. Par is $1,000 for both securities. Calculate the yield spread of a Ford note. Use semi-annual compounding.

2. You believe that the yield curve is going to steepen very soon, more specifically; a fall in short-term rates and a rise in long-term rates are expected. What strategy should you pursue in the bond market to position yourself to profit from your beliefs?

Hint. You need to think about your investment horizon and immunization strategy. Based on what traders say, this strategy has originated with the Salomon Bond arbitrage ("bond-arb") group. However, it is so well known that profits may be slim nowadays

Reference no: EM1311232

Questions Cloud

Correlation in the population : A random sample of 15 paired observations has a correlation of -.46. Can we conclude that the correlation in the population is less than zero? Use the .05 significance level.

Manufacturing overhead cost be assigned to production : The company uses a job-order costing system. How would you recommend that manufacturing overhead cost be assigned to production? Be specific, and shoe computations.

The full annealing heat treatment : Describe the full annealing heat treatment for a plain carbon steel.

Explanation of social welfare under tariff : What is autarky price and quantity equilibrium for both home and foreign? What is the open trade price and volume under free trade.

Computation of yield from investment : Computation of yield from investment thus it is therefore well known that profits may be slim nowadays

Determine actual cost and operating data : At the end of the year, the firm's records revealed the following actual cost and operating data for all cases handled during the year.

Correlation between the variables : Using the 0.01 significance level, can we conclude that there is a positive correlation between the variables?

Evaluation of profitable investment : If you can borrow (and lend) money at an interest rate of 8 percent, will the investment be a profitable undertaking? Is the project profitable at an interest rate of 12 per cent? Provide numerical calculations in support of your answers.

Evaluate the total cost charged to case : Evaluate the total cost charged to Case 618-3? Show computations by department and in total for the case.

User Account

All Pages