The return on 1 year zero coupon bond and 4 t h year zero coupon bond, supposing that the term structure will be same as now. Introduction: Bond: It is a type of debt instrument which is issued by the Government or by some corporations. The relevant purpose of issuing bonds is to raise money from the market prevailing under the borrowing agreement. According to this agreement, the issuer of the bond has to pay periodic interest to the holder of the bond on an agreed date.

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Answer 1

Question

Chapter 15, Problem 14PS

a.

Summary Introduction

To calculate: The return on 1 year zero coupon bond and 4^t^h year zero coupon bond, supposing that the term structure will be same as now.

Introduction:

Bond: It is a type of debt instrument which is issued by the Government or by some corporations. The relevant purpose of issuing bonds is to raise money from the market prevailing under the borrowing agreement. According to this agreement, the issuer of the bond has to pay periodic interest to the holder of the bond on an agreed date.

b.

Summary Introduction

To evaluate: The highest expected 1-year return given among the 1-year zero-coupon bond and 4^t^h year zero coupon bond.

Introduction:

Expected rate of return: When an investment is made, the investor expects or anticipates some return. The rate at which this anticipated or expected returns are earned is called expected rate of return. It is also called as anticipated rate of return.

c.

Summary Introduction

To evaluate: The rate of return on 1-year zero-coupon bond and 4-year zero-coupon bond using the expectations hypothesis and indicate the greatest return earner.

Introduction:

Expectations Hypothesis: This is also called as “unbiased expectations hypothesis theory”. This theory is applicable in calculations related to foreign exchange. According to the theory, the forward exchange rate will be equal to the spot rate at the time of delivery on a specific day. This theory can function only when the risk premium is absent.

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You are thinking of inving in Tikki's Torches, Inc. You have only the following information on the at year-end 2008: Net income0.000 Total debt 12.2 million Debt ratio 42% What is Tikki's ROE for 2008? a. 1.79% b. 10.14% c. 3.09% d. 4.26%

Answer 2

Question

Chapter 15, Problem 14PS

a.

Summary Introduction

To calculate: The return on 1 year zero coupon bond and 4^t^h year zero coupon bond, supposing that the term structure will be same as now.

Introduction:

Bond: It is a type of debt instrument which is issued by the Government or by some corporations. The relevant purpose of issuing bonds is to raise money from the market prevailing under the borrowing agreement. According to this agreement, the issuer of the bond has to pay periodic interest to the holder of the bond on an agreed date.

b.

Summary Introduction

To evaluate: The highest expected 1-year return given among the 1-year zero-coupon bond and 4^t^h year zero coupon bond.

Introduction:

Expected rate of return: When an investment is made, the investor expects or anticipates some return. The rate at which this anticipated or expected returns are earned is called expected rate of return. It is also called as anticipated rate of return.

c.

Summary Introduction

To evaluate: The rate of return on 1-year zero-coupon bond and 4-year zero-coupon bond using the expectations hypothesis and indicate the greatest return earner.

Introduction:

Expectations Hypothesis: This is also called as “unbiased expectations hypothesis theory”. This theory is applicable in calculations related to foreign exchange. According to the theory, the forward exchange rate will be equal to the spot rate at the time of delivery on a specific day. This theory can function only when the risk premium is absent.

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Answer 3

Question

Chapter 15, Problem 14PS

a.

Summary Introduction

To calculate: The return on 1 year zero coupon bond and 4^t^h year zero coupon bond, supposing that the term structure will be same as now.

Introduction:

Bond: It is a type of debt instrument which is issued by the Government or by some corporations. The relevant purpose of issuing bonds is to raise money from the market prevailing under the borrowing agreement. According to this agreement, the issuer of the bond has to pay periodic interest to the holder of the bond on an agreed date.

b.

Summary Introduction

To evaluate: The highest expected 1-year return given among the 1-year zero-coupon bond and 4^t^h year zero coupon bond.

Introduction:

Expected rate of return: When an investment is made, the investor expects or anticipates some return. The rate at which this anticipated or expected returns are earned is called expected rate of return. It is also called as anticipated rate of return.

c.

Summary Introduction

To evaluate: The rate of return on 1-year zero-coupon bond and 4-year zero-coupon bond using the expectations hypothesis and indicate the greatest return earner.

Introduction:

Expectations Hypothesis: This is also called as “unbiased expectations hypothesis theory”. This theory is applicable in calculations related to foreign exchange. According to the theory, the forward exchange rate will be equal to the spot rate at the time of delivery on a specific day. This theory can function only when the risk premium is absent.

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Answer 4

Question

Chapter 15, Problem 14PS

a.

Summary Introduction

To calculate: The return on 1 year zero coupon bond and 4^t^h year zero coupon bond, supposing that the term structure will be same as now.

Introduction:

Bond: It is a type of debt instrument which is issued by the Government or by some corporations. The relevant purpose of issuing bonds is to raise money from the market prevailing under the borrowing agreement. According to this agreement, the issuer of the bond has to pay periodic interest to the holder of the bond on an agreed date.

b.

Summary Introduction

To evaluate: The highest expected 1-year return given among the 1-year zero-coupon bond and 4^t^h year zero coupon bond.

Introduction:

Expected rate of return: When an investment is made, the investor expects or anticipates some return. The rate at which this anticipated or expected returns are earned is called expected rate of return. It is also called as anticipated rate of return.

c.

Summary Introduction

To evaluate: The rate of return on 1-year zero-coupon bond and 4-year zero-coupon bond using the expectations hypothesis and indicate the greatest return earner.

Introduction:

Expectations Hypothesis: This is also called as “unbiased expectations hypothesis theory”. This theory is applicable in calculations related to foreign exchange. According to the theory, the forward exchange rate will be equal to the spot rate at the time of delivery on a specific day. This theory can function only when the risk premium is absent.

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Answer 5

Chapter 15, Problem 14PS

a.

Summary Introduction

To calculate: The return on 1 year zero coupon bond and 4^t^h year zero coupon bond, supposing that the term structure will be same as now.

Introduction:

Bond: It is a type of debt instrument which is issued by the Government or by some corporations. The relevant purpose of issuing bonds is to raise money from the market prevailing under the borrowing agreement. According to this agreement, the issuer of the bond has to pay periodic interest to the holder of the bond on an agreed date.

b.

Summary Introduction

To evaluate: The highest expected 1-year return given among the 1-year zero-coupon bond and 4^t^h year zero coupon bond.

Introduction:

Expected rate of return: When an investment is made, the investor expects or anticipates some return. The rate at which this anticipated or expected returns are earned is called expected rate of return. It is also called as anticipated rate of return.

c.

Summary Introduction

To evaluate: The rate of return on 1-year zero-coupon bond and 4-year zero-coupon bond using the expectations hypothesis and indicate the greatest return earner.

Introduction:

Expectations Hypothesis: This is also called as “unbiased expectations hypothesis theory”. This theory is applicable in calculations related to foreign exchange. According to the theory, the forward exchange rate will be equal to the spot rate at the time of delivery on a specific day. This theory can function only when the risk premium is absent.

Answer 6

Chapter 15, Problem 14PS

a.

Summary Introduction

To calculate: The return on 1 year zero coupon bond and 4^t^h year zero coupon bond, supposing that the term structure will be same as now.

Introduction:

Bond: It is a type of debt instrument which is issued by the Government or by some corporations. The relevant purpose of issuing bonds is to raise money from the market prevailing under the borrowing agreement. According to this agreement, the issuer of the bond has to pay periodic interest to the holder of the bond on an agreed date.

Answer 7

Chapter 15, Problem 14PS

a.

Summary Introduction

To calculate: The return on 1 year zero coupon bond and 4^t^h year zero coupon bond, supposing that the term structure will be same as now.

Introduction:

Bond: It is a type of debt instrument which is issued by the Government or by some corporations. The relevant purpose of issuing bonds is to raise money from the market prevailing under the borrowing agreement. According to this agreement, the issuer of the bond has to pay periodic interest to the holder of the bond on an agreed date.

Answer 8

b.

Summary Introduction

To evaluate: The highest expected 1-year return given among the 1-year zero-coupon bond and 4^t^h year zero coupon bond.

Introduction:

Expected rate of return: When an investment is made, the investor expects or anticipates some return. The rate at which this anticipated or expected returns are earned is called expected rate of return. It is also called as anticipated rate of return.

Answer 9

b.

Summary Introduction

To evaluate: The highest expected 1-year return given among the 1-year zero-coupon bond and 4^t^h year zero coupon bond.

Introduction:

Expected rate of return: When an investment is made, the investor expects or anticipates some return. The rate at which this anticipated or expected returns are earned is called expected rate of return. It is also called as anticipated rate of return.

Answer 10

c.

Summary Introduction

To evaluate: The rate of return on 1-year zero-coupon bond and 4-year zero-coupon bond using the expectations hypothesis and indicate the greatest return earner.

Introduction:

Expectations Hypothesis: This is also called as “unbiased expectations hypothesis theory”. This theory is applicable in calculations related to foreign exchange. According to the theory, the forward exchange rate will be equal to the spot rate at the time of delivery on a specific day. This theory can function only when the risk premium is absent.

Answer 11

c.

Summary Introduction

To evaluate: The rate of return on 1-year zero-coupon bond and 4-year zero-coupon bond using the expectations hypothesis and indicate the greatest return earner.

Introduction:

Expectations Hypothesis: This is also called as “unbiased expectations hypothesis theory”. This theory is applicable in calculations related to foreign exchange. According to the theory, the forward exchange rate will be equal to the spot rate at the time of delivery on a specific day. This theory can function only when the risk premium is absent.

Answer 12

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Answer 13

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Answer 14

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Answer 15

Ch. 15 - Prob. 1PS Ch. 15 - Prob. 2PS Ch. 15 - Prob. 3PS Ch. 15 - Prob. 4PS Ch. 15 - Prob. 5PS Ch. 15 - Prob. 6PS Ch. 15 - Prob. 7PS Ch. 15 - Prob. 8PS Ch. 15 - Prob. 9PS Ch. 15 - Prob. 10PS

Solution Summary: The author calculates the rate of return for 1-year bond and 4-year coupon bond, assuming the term structure will be the same as now.

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