The demand curve and supply curve for one-year discount bonds with a face value of $1.050 are represented t 8 Price -0.8Quantity 1.160 Price Quantity 720 8 The expected equilibrium quantity of bonds is 271 (Round your response to the nearest whole number)
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- Consider the market for a bond which has a face value of $2,000, pays a coupon of $100, and matures in 1 year (that is, you will get the face value and one coupon payment next year). Suppose the demand for such bonds is given by P=4,000-2Q, and that the supply of such bonds is given by P=1,000+Q. What is the yield to maturity if one were to purchase the bond at the equilibrium price? 5% .05% 10% .10%Explain what the term "bond price elasticity" means. Would bond price elasticity indicate that zero-coupon or high-coupon bonds with the same yield to maturity have a greater price sensitivity? Why? What does this mean for the market value volatility of zero-coupon Treasury bonds vs high-coupon Treasury bonds in mutual funds?Suppose you are an analyst with the following data: rRF = 5.5% rM – rRF = 6% b=0.8 D1 = $1.00 P0 = $25.00 g = 6% firm’s bond yield = 6.5% a) What is this firm’s cost of equity using the DCF? b) What is this firm’s cost of equity using the bond-yield-plus-risk-premium approach? Use the midrange of the judgmental risk premium for the bond-yield-plus-risk-premium approach.
- E3 The demand curve and supply curve for one-year discount bonds were estimated using the following equations: Bd Price=-2/5Quantity+990 Bs Price=Quantity+500 As the stock market continued to rise, the Federal Reserve felt the need to increase the interest rates. As a result, the new market interest rate increased to 19.65%, but the equilibrium quantity remained unchanged. What are the new demand and supply equations? Assume parallel shifts in the equationsAssume that in March 2019, you bought a zero-coupon bond issued by a municipal government with a face value of $10,000 and a maturity date of March 2023. a) Use a bond-pricing equation to illustrate the market price (the market value) of the zero-coupon bond in March 2020. You just have to write out the equation; you do not have to solve the equation b) Assume that you are thinking about selling the zero-coupon bond in March 2020. Use a bond-pricing equation to illustrate what will determine the actual return that you will have earned on the bond. You just have to write out the equation; you do not have to solve the equation. c) Assume that you end up selling the bond in March 2020 and that the market interest rate on the bond is lower in March of 2020 than it was in March of 2019. Briefly discuss the effects of the decrease in the bond’s interest rate on the actual return that you have earned on the bond..For problems 1 – 5, use a discount rate of 10%. 1.What would be the value of an asset that returns a cash flow of $1000 one year from now? 2.What would be the value of an asset that returns a cash flow of $1000 in each of the next five years starting one year from now? 3.What would be the value of an asset that returns a cash flow of $100 in each of the next five years starting one year from now plus an additional $1000 at the end of the fifth year? 4.What would be the value of an asset that returns a cash flow of $100 in each of the next five years starting one year from now and $200 per year in years six through ten? 5.What would be the value of an asset that returns a cash flow of $100 each year forever starting one year from now?
- The demand curve and supply curve for one-year discount bonds were estimated using the following equations:Bd : Price = - 2/5 Quantity + 990Bs : Price = Quantity + 500As the stock market continued to rise, the Federal Reserve felt the need to increase the interest rates. As a result, the new market interest rate increased to 19.65%, but the equilibrium quantity remained unchanged. What are the new demand and supply equations? Assume parallel shifts in the equations.6) The Baumol-Tobin analysis suggests that an increase in the brokerage fee for buying and selling bonds will cause the demand for money to ________ and the demand for bonds to ________. A) increase; increase B) increase; decrease C) decrease; increase D) decrease; decrease 7) The Baumol-Tobin analysis suggests that a decrease in the brokerage fee for buying and selling bonds will cause the demand for money to ________ and the demand for bonds to ________. A) increase; increase B) increase; decrease C) decrease; decrease D) decrease; increase 8) In the Baumol-Tobin analysis of transactions demand for money, either an increase in ________ or a decrease in ________ increases money demand. A) income; interest rate B) interest rates; brokerage fees C) brokerage fees; income D) interest rate; income 9) In the Baumol-Tobin analysis of the demand for money, either an increase in ________ or an increase in ________ increases money demand. A) income;…As of June the US risk-free rate is approximately 0.159%. Assume for the moment that market risk is 7% due to the pandemic. Answer the following questions: A. What is the required return for the company you used for the financial analysis project? Show your calculations. B. The risk-free rate and market risk above define a Security Market Line (SML). If the risk-free rate were to rise to 0.9% next month, how would that change the SML? Explain your answer. C. Assume instead of the change in B that the market risk declined to a more normal 5% by December. How would that change the SML defined by the original conditions? Explain your answer.
- You are given the following information about the Limassol District: Number of households 2022: 148,100 Total residential stock 2022: 159,059 units Based on the above data, calculate the expected gap between demand and supply in number of housing units in Limassol in 2022. Show clearly and explain any calculations and/or assumptions you make to support your answer. Also, explain the state of the market represented by the result of your calculation (oversupply, balance, excess demand) and how house prices should move in 2022 as a result of this situation.A four-year bond has an 6 percent coupon rate and a face value of $1,000 . If the bond's current price is $817.75 , calculate the yield to maturity of the bond (assuming annual interest payments). A) 8 percent B) 10 percent C) 12 percent D) 6 percentSuppose earlier this morning, your broker recommended you buy Lee County, NC school construction bonds for your personal investment portfolio. Ceteris paribus, it follows that she thinks the market is currently and she expects Lee County bond prices to Lee County debt, in the future. Select one: a. over-pricing; increase b. over-pricing; decrease C. under-pricing; increase d. under-pricing; decrease