Determine how you derived your solutions

Assignment Help Other Subject

Reference no: EM132208384

Question: Suppose a 6-year timeframe where the interest rate for the first 2 years is 10%, the interest rate for the next 2 years is 12% and the interest rate for the final 2 years is 4%. We want to compare the final cash position that would result form some different savings plans. For simplicity assume that all the assets described below share the same risk levels, and the return of all these assets are described by the rates given above.

You will need to show your work so I can see how you derived your solutions.

Option A) Put $1000 into a 6 year zero-coupon bound (no coupon payments) at fair market-value and hold until maturity

Option B) Put $1000 into a 6 year coupon bond and hold until maturity, re-investing all the coupon payments into a saving account that pays according to the rates described above.

Option C) put $1000 into a 6 year zero- coupon bond, hold for 2 years, sell in secondary market immediately after the rate increases to 12%.

Take the funds from the sale and purchase a 4-year coupon bond, re-investing the coupon payment into a savings account( note that the bond price will not be a while number and neither will the coupons, which is fine since the values represent you share' of a much larger investment). You then sell this bond into the secondary market immediately after the rate changes to 4%(and this is also immediately after receiving the 2nd coupon payment). Take the funds form this sale and purchase a two-year zero-coupon bond and hold until maturity.

Reference no: EM132208384

Questions Cloud

Write a program to play the memory game : Children often play a memory game in which a deck of cards containing matching pairs is used. The cards are shuffled and placed face down on a table.

Define a structure that contains a character member : Define and integer variable named EmployeesCount and initialize it to 3 employees .

Describe the supply chain components : Study supply chain structure of any humanitarian organization in the United Arab Emirates or in any other country worldwide. Identify its main supply chain.

A program to show the truth table for a simple wff : Write a program in C++ that will output the truth table for a simple wff. There will only be Ps and Qs, so you can hard code the P truth table

Determine how you derived your solutions : Suppose a 6-year timeframe where the interest rate for the first 2 years is 10%, the interest rate for the next 2 years is 12% and the interest rate.

How many values in the array are not a multiple of 2 : The program should print the number of odd values in the array, that is how many values in the array are not a multiple of 2.

When is the final for the given class : Explain what effect a reduction in productivity has on wage setting behavior, P setting behavior, the equilibrium real wage, the natural rate of unemployment.

Create a menu driven application that uses information : Create a menu driven application that uses information in files to keep track of your stock portfolio.

Print out the values of the integers entered : Write a program in C that accepts two integer inputs from a user (through scanf() ), and assigns them to integer variables a and b.

User Account

All Pages