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- Suppose initially that two assets, A and B, will each make a single guaranteed payment of $400 in 1 year. But asset A has a current price of $280 while asset B has a current price of $320. Instructions: Round your answers to 2 decimal places. a. What are the rates of return of assets A and B at their current prices? Return on assetA =| |percent Return on asset B = percent Given these rates of return, which asset should investors buy and which asset should they sell? Buy asset (Click to solect) v and sell asset (Click to select) b. Assume that arbitrage continues until A and B have the same expected rate of return. When arbitrage ends, will A and B have the same price? (Click to select) Next, consider another pair of assets, C and D. Asset C will make a single payment of $600 in 1 year, while D will make a single payment of $800 in 1 year. Assume that the current price of C is $440 and that the current price of D is $680. c. What are the rates of return of assets C and D at their…Q) Compare the alternatives shown below on the basis of a future worth analysis, using an interest rate of 8% per year. Choose correct option A.A=-78983.65 B= -25193.45 B.A= 38987.65 B= 39125.45 C.A= 87983.65 B= 52193.45Suppose that we can describe the world using two states and that two assets are available, asset K an asset L. We assume the asset’s future prices have the following distribution State Future Price Asset K Future Price Asset L 1 $55 $60 2 $45 $30 The current price of asset K is $50, and the current price of asset L is $50. 1. What are the values of the unit claims (C1 and C2 )?
- Q) Compare the alternatives shown below on the basis of a future worth analysis, using an interest rate of 8% per year. Choose option A.A=-78983.65 B= -25193.45 B.A= 38987.65 B= 39125.45 C.A= 87983.65 B= 52193.45Consider three alternatives A, B, and "do-nothing." (a) Construct a choice table for interest rates from 0% to 100%. Year A B 0 1-5 –$10,000 3,200 -$15,000 4,500You are offered the choice of two payments streams A. $150 paid one year from now, and $150 paid two years from now. B. $140 paid one year from now and $164 paid two years from now. a. Which payment stream would you prefer if the interest rate is 9 percent? (Prefer Stream B/Prefer Stream A)? b. Which payment stream would you prefer if the interest rate is 12 percent? (Prefer Stream A/Prefer Stream B)?
- j. Find the PV and the FV of an investment that makes the following end-of-year payments. The interest rate is 8%. Year 1 $100, Year 2 $200, Year 3 $400 Year Payment 1 100 2 200 3 400 Rate 8% To find the PV, use the NPV function: Pv= $581.59 Year Payment x (1+ I)^(N- t) = FV 1 100 2 200 3 400Find the PV and FV of an investment that makes the following end-of-year payments. The interest rate is 8%. Year Payment 1 100 2 200 3 400 Rate = 8% To find the PV, use the NPV function: PV = Year Payment x (1 + I )^(N-t) = FV1 100 1.17 116.64 2 200 1.08 216.00 3 400 1.00 400.00 Sum = ?PV = ?FV of PV = ?IRR 1) Nominal Value: N= |= Emission Date Valuation Date: New Price: What is the new IIR? 2) Nominal Value: N= |= Emission Date Valuation Date: New Price: What is the new IIR? NPV 3) Par Value N= |= Emission Date: Buy on: Opportunity Rate What is the new NPV? $ 3,600,000 2 years 10% N.A.Q. 7/5/2023 8/5/2024 $ 3,550,000 XXX % EA ? $ 202,000 3 years 18% N.A. per year 5/15/2023 6/15/2024 $ 201,500 XXX % EA ? $ 100,000,000 2 years 15% N.A. Semi-annual 8/23/2024 4/23/2025 13% EA $$$?
- Consider a forward contract that expires in 9 months. The underlying asset is worth $250 and the forward price is $285. Suppose we hold the long position in the forward contract. The risk free rate is 8 percent. The appropriate forward price should be: a. $270.00 b. $35.00 c. $285.00 d. $264.85What is the future value of GH¢ 1,200 a year for 40 years at 8 percent interest? Assume annual compounding. #randomized O A. GH¢ 301,115 B. GH¢ 306,492 O C. GH¢ 310,868 OD. GH¢ 342,908 O E. GH¢ 347,267EX.M.106 Use the future value tables to answer the following questions. (Click here to access the PV and FV tables to use with this problem.) Required: Round your answers to the nearest dollar. 1. What is the value on January 1, 2027, of $75,000 deposited on January 1, 2020, which accumulates interest at 14% annually? $___________ 2. What is the value on January 1, 2025, of $15,000 deposited on July 1, 2020, which accumulates interest at 16% compounded quarterly? $__________ 3. How much interest will accumulate on an investment of $10,000 left on deposit for 7 years at 8% compounded annually? $__________