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The yield to maturity on one-year zero-coupon bonds is 7.6%. The yield to maturity on two-year zero-coupon bonds is 8.6%.
a. What is the forward rate of interest for the second year? (Do not round intermediate calculations. Round your answer to 2 decimal places.)
Forward rate of interest %
b. If you believe in the expectations hypothesis, what is your best guess as to the expected value of the short-term interest rate next year? (Do not round intermediate calculations. Round your answer to 2 decimal places.)
Short-term interest rate %
c. If you believe in the liquidity preference theory, is your best guess as to next year’s short-term interest rate higher or lower than in (b)?
Higher
Lower
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What will be the new price per share after the repurchase?
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Calculate with explanation the unit costs of the souvenirs and determine the price of the souvenirs and explain any other information that might be relevant for deciding the price
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