Taylor must send a bad-news message to a client and indicate to her that he will be unable to meet a delivery deadline. What sho
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Answer:
Bond Price = $951.9633746 rounded off to $951.96
Explanation:
To calculate the quote/price of the bond today, which is the present value of the bond, we will use the formula for the price of the bond. As the bond is an annual bond, we will use the annual coupon payment, annual number of periods and annual YTM. The formula to calculate the price of the bonds today is attached.
Coupon Payment (C) = 1000 * 10% = $100
Total periods remaining (n) = 3
r or YTM = 12%
Bond Price = 100 * [( 1 - (1+0.12)^-3) / 0.12] + 1000 / (1+0.12)^3
Bond Price = $951.9633746 rounded off to $951.96
Answer:
the Expected rate of return will be 8.2%
the variance will be 0.001296
Explanation:
We will calculate the Expected Rate of Return which is the sum of the wieghted return based on their probabilities:
return of 0.15 probability 20% = 0.03
return of 0.07 probability 70% = 0.049
return of 0.03 probability 10% = 0.003
expected return = 0.082 = 8.2%
Now to calculate the variance we do:
∑(rk-ERR)^2 x pk
The sum of the difference between the expected rate and the escenario rate, power two, and multiply by their posibility
the variance will be: 0.001296