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if the interest rate is 5%,what is the present value of a security that pays you $1,050 next year and $1,102.50 two years from now? if this security sold for $2,200 is the yield to maturity greater or less than 5%? why?

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Hubert Koch
Hubert KochLv2
28 Sep 2019
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Related questions

(Term structure of interest rates) you want to invest your savings of 20,000 in government securities for the next two years. Currently, you can invest either in a security that pays interest of 8.0% per year for the next two years Ornish you Curity that matures in one year but pays only 6% interest if you make the latter choice, you will then be investor savings at the end of the first year for another year.

A. Why might you choose to make the investment in the one your security that pays an interest rate of only 6%, as opposed to investing in the to your security paying 8%? Provide numerical support for your answer. Which theory of term structure have you supported in your answer?

If you choose the 2-year security, the value of your savings after the second year will be?

B. Assume your required rate of return on the second-year investment is 11.0 percent; otherwise, you will choose to go with the 2-year security. What rationale could you offer for your preference?

?(Term structure of interest rates?) You want to invest your savings of ?$26,000 in government securities for the next 2 years.? Currently, you can invest either in a security that pays interest of 8.1 percent per year for the next 2 years or in a security that matures in 1 year but pays only 6.1 percent interest. If you make the latter? choice, you would then reinvest your savings at the end of the first year for another year.

a. Why might you choose to make the investment in the 1?-year security that pays an interest rate of only 6.1 ?percent, as opposed to investing in the 2-year security paying 8.1 ?percent? Provide numerical support for your answer. Which theory of term structure have you supported in your? answer?

b. Assume your required rate of return on the? second-year investment is 11.1 ?percent; otherwise, you will choose to go with the 2?-year security. What rationale could you offer for your? preference?

You want to invest your savings of $30,000 in government securities for the next 2 years. Currently, you can invest either in a security that pays interest of 8.4 percent per year for the next 2 years or in a security that matures in 1 year but pays only 5.8 percent interest. If you make the latter choice, you would then reinvest your savings at the end of the first year for another year.

If you choose the 2-year security, the value of your savings after the second year will be? Answer: $35, 252.00

If you choose to invest in the 1-year security, the value of your savings after the first year will be? Answer: $31,740.00

To do as well as you would with the first choice, during the second year the 1-year security would have to earn??????

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