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1. a,) A zero-coupon bond has a face value of $120.00 and matures in 2 years. The rate of return on equally risky assets is 5% (.05). What will its price be today? Suppose you sell it next year when the rate of return on equally risky assets is 7% (.07). What rate of return did you earn holding the asset for a year?
b.) A stock is expected to pay an annual dividend of $6 each year into the indefinite future. Rates of return on equally risky assets are 4% (.04). The stock price is $170. Is there a bubble on this stock? How do you know ? How big is the bubble? To be consistent with no arbitrage possibilities, what price are people expecting the stock will have next year? Explain.
c.) You win the lottery. You can either have $850,000 right now, or $1,000,000 paid in 5 annual installments of $200,000 starting next year. If the interest rate is 6% .(06), which will you choose? Why? What if the interest rate is 4% (.04)? Explain. (Hint: you can use the formula for pricing a fixed-payment loan here.)
Could you please help with this equation and explain how you came to your answer. Consider a version of the Tragedy of the Commons in which herder
Determine the price-quantity combination that maximises your firm's profits.
What are the effects of capital formation by comparing the ppf,at the present time and ten years in the future,for two economies,one with a high and the other with alow rateof capital formation.
Review and chose a firm of your choice or one provided by your instructor. Is this firm a monopoly? In what ways could it be considered a monopoly? What markets are involved? What antitrust legislation would apply? Is antitrust legislation fair to yo..
A project needs an investment of $15,000 in year zero and is expected to generate a series of 5 equal annual net income of $8,000 each in constant dollars. The average inflation rate is 4%, and the market interest rate of 10%, what is the equivalent ..
How do you calculate the opportunity cost for: Mark can produce 50 baseballs in a month and Katie can produce 42 baseballs in a month. Also, Mark can produce 40 bats in a month and Katie can produce 30 bats in a month. What is Mark's opportunity cost..
Using the policies together to "fix" the economy makes sense, but would require careful coordination to avoid "overdoing" it.
Choose a product that negatively affects the environment, assuming a linear flow of materials. Then, use a cyclical materials flow approach, and conduct a hypothetical life cycle assessment (LCA), pointing out at least two preventive initiatives that..
Suppose the demand for French bread rises. Explain what happens to producer surplus in the market for French bread. Explain what happens to producer surplus in the market for flour. Illustrate your answers with diagrams.
What is the 10-day 97.5% value at risk for the portfolio? By how much does diversification reduce the VAR?
Find the monetary base. Please provide the authentic solution of this problem.
Fast PC, Inc., is considering a new automated assembly line to automate assembly of tablets. The new line can be installed for $12,450,000 today and will have a life of 7 years until technological obsolescence. Based on net present value estimate, do..
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