Already have an account? Get multiple benefits of using own account!
Login in your account..!
Remember me
Don't have an account? Create your account in less than a minutes,
Forgot password? how can I recover my password now!
Enter right registered email to receive password!
To understand how treasury spot rates are used to calculate the arbitrage-free value of the treasury security, we will take imaginary treasury spot rates (given in the third column of the Table No.6) to find the value of 7% 5-year treasury security. Sum of the present value (given in the last column of the Table No.1) is the arbitrage-free value for the 7% 5-year treasury security.
Table 1: Determination of the Arbitrage-Free Value of a 7% 5-Year Treasury Security
(a)
(b)
(c)
(d)
(e)
Period
Years
Cash Flow in Rs.
Spot Rate in %
PV in Rs.
1
0.5
3.5
2.7589
3.4524
2
1.0
3.0356
3.3961
3
1.5
3.2856
3.3330
4
2.0
3.5563
3.2617
5
2.5
3.8659
3.1805
6
3.0
4.1068
3.0982
7
4.3574
3.0099
8
4.0
4.6012
2.9177
9
4.5
4.9812
2.8049
10
5.0
103.5
5.1225
80.3725
Arbitrage-Free Value of a 7% 5-Year Treasury Security is =
108.8268
A company commissioned a valuation of its land and buildings for inclusion in its financial statements. The valuation document contained the following details:
Explain Hard capital rationing and Soft capital rationing The NPV decision rule to admit all projects with a positive net present value requires the existence of a perfect cap
Fixed Costs The costs a rigid incurs doing business that do not change in relation to production. Rent, for example, is a fixed cost because it remains constant whether product
What is GATT, and what is its goal? GATT is the General Agreement on Tariffs and Trade it is a agreement that seeks to decrease trade barriers among participant nations.
What is a financial ratio? A financial ratio is a number that convey the value of one financial variable relative to another. Put more easily, a financial ratio is the final
Determine about the Sales agents Normally used for more effective sales and marketing activities for a product for example AVON (cosmetics) door to door agents in the UK. -
Types of Warrants The warrants can be classified into different types. They are: Detachable Warrants These warrants are issued with most debentures, like convertible o
#questi Saven Travel Corporation is considering several investment opportunities in order to diversify its operations. Mr. Saven, president, is trying to determine the firm''''s co
Seasonal Variation Under this variation, we observe that the variable under consideration shows a similar pattern during certain months of the successive years. An example of s
Describe the sales forecasting process. Sales assumptions are a group effort. Marketing and Sales personnel usually provide assessments of demand and the competition. Producti
Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!
whatsapp: +1-415-670-9521
Phone: +1-415-670-9521
Email: [email protected]
All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd