Assume that the 1-year spot rate on a government bill is 5.25%, and the spot rate for a 2-year bill is 5.75%. What is the par rate of a two-year bill? Round your answer to the nearest one-tenth basis point.

6. A firm is considering investing in a project with the following cash flows:

The initial investment is OMR 7,250. The firm has a required rate of return of 8 per cent.

Calculate:

1. The payback period;   
2. The discounted payback;
3. The net present value.   

An investor with an investment horizon of 1.6 year purchases a 5% coupon bond with 2 years to maturity and a face value of $100? The bond is trading at a yield of 5%. Coupons are paid semi-annually. What is this investor's duration gap?

Assume semi-annual compounding. Round your answer to 4 decimal places.

Suppose an investor with a 7-year investment horizon is considering the purchase of a 4.50% APR, monthly payment, mortgage with 22 years (264 months) remaining until maturity. The mortgage currently has an outstanding balance of $245,000 and is selling to offer a YTM of 4.8% on the secondary market. The investor expects to be able to reinvest the first 36 monthly cashflows at 4.8% (over their entire reinvestment interval), but expects to be able to reinvest the last 48 monthly payments at only 4.5%. At the end of her investment horizon, she expects to be able to sell the mortgage at a YTM of 4.5%. What is the total/expected (effective) return offered by this security?

Consider a 2-year Treasury bond with a face value of $100 and that pays coupons at a rate of 6% semiannually. What is the bonds par yield given the following Treasury zero rates?
Maturity (years) Zero rates
0.5          3.0%
1.0          3.3%
1.5          3.6%
2.0          3.9%

A forklift will last for only 3 more years. It costs $6,000 a year to maintain. For $17,000 you can buy a new lift that can last for 8 years and should require maintenance costs of only $3,000 a year.

a-1. Calculate the equivalent cost of owning and operating the forklift if the discount rate is 5% per year. (Do not round intermediate calculations. Round your answer to 2 decimal places.)

a-2. Should you replace the forklift?

b-1. Calculate the equivalent cost of owning and operating the forklift if the discount rate is 12% per year. (Do not round intermediate calculations. Round your answer to 2 decimal places.)

b-2. Should you replace the forklift?

1. A city has calculated the probability of having a significant rupture in a year: p = 0.02. This probability remains fixed from year to year, independent of whether there was a rupture in a preceding year. The city has asked you to determine the following (for each question be sure to specify what probability model you are using and justify the choice.)

a. The probability that the rupture will occur in the 4th year.

b. The expected number of years until the first rupture.

c. The probability of exactly 4 ruptures in the next 14 years.

d. The standard deviation, of the number of ruptures in the next 14 years.

e. The probability that the first rupture occurs in one of the first 4 years.

3. The Wolf Company uses a standard cost accounting system and estimates production for the year to be 60,000 units. At this volume, the company's variable overhead costs are $0.50 per direct labor hour.
   The company's single product has a standard cost of $30.00 per unit. Included in the $30.00 is $13.20 for direct materials (3 yards) and $12.00 of direct labor (2 hours) and $4.80 for overhead. The company's variable overhead costs are $0.50 per direct labor hour.
   Production information for the month of March follows:
   

Variances

Required:
In the chart above, the fixed overhead variances are given. Provide the calculations to prove those numbers.

Fixed OH price variance:

Fixed OH volume variance:

Record journal entries for the following production transactions (see descriptions in the journal). Note-the variances are computed for you in the chart above.

1.Record direct materials variances, 2.Record direct labor variances, 3.Record the actual variable and fixed overhead incurred. (this is not in your demonstration notes) 4. Record the variable and fixed overhead applied to production. (this is not in your demonstration notes) 5. Record manufacturing overhead variances, 6. Transfer finished goods to CGS, 7. Record Cost of Goods Sold-assume all production was sold for $235,000., 8.Record the closing entry for the variance accounts

Given the following Hypothetical Example and the base year is 2017, answer the questions that follow

1. Calculate the nominal GDP in the three years
   
   
2. Calculate the real GDP in the three years.
   
   
3. Calculate the GDP deflator in the three years
   
   
4. Calculate the real GDP growth between 2018 and 2019
   
   
5. Calculate the rate of inflation in 2019

June 30th: The company issues a 5-year bond with a face value of $100,000 and a stated annual rate of 8%. Interest is due on June 30th each year. The market rate is 6% on the date of issuance. Prepare the Journal Entry for June 1st, and the journal entry to acrrue interest at year end. The effective interest method is used to amorize bond premiums and discounts.