In: Finance

Kruger, Inc. has a $10,000 pure discount bond that comes due in one year. The risk-free rate of return is 3 percent. The firm's assets are expected to be worth either $9,900 or $12,100 in one year. Currently, these assets are worth $11,000. What is the current value of the firm's debt?

$9,947.23 |
||

$9,150.08 |
||

$9,674.76 |
||

$8,752.10 |
||

$8,428.33 |

20. The Company has a $48,000 pure discount bond that comes due
in one year. The risk-free rate of return is 3 percent. The firm's
assets are expected to be worth either $45,000 or $55,000 in one
year. Currently, these assets are worth $50,000. What is the
current value of the firm's debt?
$43,724.75
$47,681.49
$46,277.13
$45,582.52
$44,106.59

Three zero coupon risk-free discount bonds of one, two and
three year term to maturity are selling for, respectively, $950,
$890 and $800. What would be the selling price today of a 10%
coupon bond of 3 year maturity (maturity value
$1,000)?

6. The one-year risk-free interest rate in Mexico is 8%. The
one-year risk-free rate in the U.S. is 3%. Assume that interest
rate parity exists. The spot rate of the Mexican peso is $.15.
a. What is the forward rate premium or discount according to the
IRP (using the exact formula)?
b. What is the one-year forward rate of the peso based on the
answer from part (a)?
c. Based on the international Fisher effect (using the exact
formula), what...

Suppose the price of the two-year pure discount bond with a
$2,500 face value is only $1,900. Is there an arbitrage
opportunity? Is yes, how would you structure a trade that has zero
cash-flow in years 1 and 2 and a positive cash-flow only in year 0
(i.e. now).
(a) What must the price of a two-year pure discount bond with a
$2,500 face value be in order to avoid arbitrage?
(b) Suppose the price of the two-year pure discount...

The one-year risk-free rate in the U.S. is 3.060 percent and the one-year risk-free rate in Mexico is 4.88 percent. The one-year forward rate between the Mexican peso and the U.S. dollar is MXN12.262/$. What is the spot exchange rate? Assume interest rate parity holds.rev: 05_17_2019_QC_CS-168753Multiple ChoiceMXN12.049/$MXN12.479/$MXN14.889/$MXN12.262/$MXN13.919/$

Assume all the following bonds are risk-free and with a par
value $100:
Bond A: one-year zero with 2% YTM
Bond B: two-year zero with 3% YTM
Bond C: Three-year zero with 4% YTM
Bond D: three-year 5% coupon-paying bond with YTM 4%.
Question: Is there any violation of the No-Arbitrage Principle?
If there is, can you develop a strategy to exploit this
opportunity?

Exercise 2: The one-year risk-free rate is i1 = 5% and the
two-year risk-free rate is i2 = 5%. The probability of default for
the first year is (1 − p1) = 10%. The marginal probability of
default for the second year is (1 − p2) = 20%.
a) Calculate the two-year cumulative probability of default (1 −
Cp2).
b) Calculate the one year corporate interest rate k1 and the
corporate forward rate for the second year c2.
c) Calculate...

If a $1,000 face-value discount bond maturing in one
year has an yield of 5%, then its price is??
plz solve it correctly and ASAP only right answer will be rated..
don't waste my question if you have no knowledge about it

An investor wishes to purchase a 1-year forward contract on a
risk-free bond which has a current market price of £97 per £100
nominal. The bond will pay coupons at a rate of 7% per annum
half-yearly. The next coupon payment is due in exactly 6 months,
and the following coupon payment is due just before the forward
contract matures. The 6-month risk-free spot interest rate is 5%
per annum effective and the 12-month risk-free spot interest rate
is 6%...

Consider the following US government (risk-free) bonds:
Bond A: 2-year note issued one year ago with a coupon rate of
5%
Bond B: 3-year note issued two years ago with a coupon rate of
5%
The price of the first bond is 100 and the price of the second
bond is 101. For simplicity, assume that investors do not face
margin requirements or interest payments to short-sell assets.
a. Assume there are no transaction costs. Establish an arbitrage
trade to...

ADVERTISEMENT

ADVERTISEMENT

Latest Questions

- What protection measures do jump oriented and return oriented programming overcome or are vulnerable to?
- The relationship between Laptop and Screen can best be categorized as Inheritance Association Ownership Private What...
- 1. Create a symbolic constant called PI in two different manners. For both, the value that...
- Alpha Enterprises, Inc. has a WACC of 14.50% and is considering a project that requires a...
- A small metal bead, labeled A, has a charge of 29 nC . It is touched...
- Describe current recordkeeping approaches in clinics or wellness centers. What steps would ensure client access and...
- this is a C++ class Topics Numeric Input (Whole Numbers) Assignment Finding Quotient Finding Remainder Numeric...

ADVERTISEMENT