What should an investor buy to yield the largest steam

Reference no: EM13204308

You are given the following information on the bond market:
Money available on January 1, 2004: one thousand dollar interest rates on January 1, 2004, on bonds of different maturities: 1 year, 4%; 2 year, 5%; 3 year, 5.5%; 4 year, 6%

Note: Consider these to be bonds at compound the interest at the rate given, that is, the three year bond pays one thousand X 1.055 to the third power at maturity.
Expected furture interest rates on the one year bonds:

January 2005 6.5%
January 2006 7%
January 2007 9%

Investment horizon: 4 years, ending in January 2008

What should an investor buy to yield the largest steam of expeced income over the period from January 1, 2004 to January 1, 2008?

Reference no: EM13204308

Questions Cloud

What are the interest rate today on a two year bond : If the term premium is equal to half a percent times the number of years to maturity of a bond for times to maturity of two, three, and four years, what are the interest rates today on a two year bond, a three year bond, and a four year bond.

Define sand falling from a chite forms a conical pile : Sand falling from a chite forms a conical pile whose hieght is always equal to 4/3 the radius of the base. how fast is the volume changing when the radius of the base

Determine what is the secuity worth : Suppose that the two years have elapsed since you purchased the security, and you hve recieved the first two payments of $600 each. Now suppose the market interest rate suddenly jumps to 10%. How much would another investor be willing to pay for y..

Explain the lifetime of an automatic transmission produced : The lifetime of an automatic transmission produced by the BW Company is normally distributed with a mean of 100,000 miles and a standard deviation of 20,000 miles.

What should an investor buy to yield the largest steam : You are given the following information on the bond market: Money available on January 1, 2004: one thousand dollar interest rates on January 1, 2004, on bonds of different maturities: 1 year, 4%; 2 year, 5%; 3 year, 5.5%; 4 year, 6%

Explain what width is required to safely support : A 15 foot long beam will safely support 600 pounds when the beam when the beam is 5 inches wide and 3 inches thick . What width is required to safely support 800 pounds of weight with a beam that is 8 feet and 4 inches thick?

Depict the resultant vector and use trigonometry : Draw the resultant vector and use trigonometry to find the magnitude and direction of the resultant force with respect to the x-axis.

User Account

All Pages