Finance Answers

Investors are evaluating two 6-year bonds at time t in an emerging financial crisis setting where
there is a strong likelihood of default. Assume the following values for the expected probability
of default (z) of the two bonds, issued respectively by companies A and B.

t+1 t+2 t+3 t+4 t+5 t+6
A 0.1 0.2 0.3 0.3 0.4 0.3
B 0 0.2 0.6 0.7 0.3 0.25

a. Assume both bonds are 6-year, 8% coupon, $1000 face value coupon bonds, each selling for
$1000. Calculate the yields on the two bonds. Which is higher?

b. Now assume a setting where all future interest rates are exogenously fixed at 6%; the prices
of the bond are now to be determined. What are the prices of bond A and B? Which is
higher?

c. With respect to (b) above, and taking both present value streams together, does there exist
some value for i that would make the price of Bond A equal to the price of Bond B?

Suppose that five states reduce income taxes in a given year. You are interested in estimating whether the tax cut has increased saving, and you find that the saving rate for residents of these five states increased by 2 percent in the year after it was introduced. Can you reasonably conclude that the tax cut caused the increase in saving? How would you conduct a difference-in-difference analysis to estimate the impact on saving? What assumption must hold for the difference-in-difference analysis to be valid?

what are the Pros and Cons of contracts on behalf of manufacturers & contracts on behalf of contractees?

Acceleron Inc. is planning to expand its present facilities. The company will make the move when its real estate sinking fund has a total value of P1.2 million. If the fund currently has P400,000 and the company adds P50,000 per year, how many years will it take for the account to reach the desired value, if it earns interest at a rate of 10% per year?

If the balance sheet of a business shows positive equity, but is short on cash, but has a large accounts receivable balance, what would you suggest to the owner to ensure that the company can pay its liabilities on time?

Regulations are describe as laws to keep parameters of systems running smoothly and within the prescribed preset of limits of the systems knowing the elements and objectives of regulations describe the regulations of a short term and long term insurance industries in south Africa

sarah transported 12,500$ in a bank 4 years back. she earned today a total amount of 15,500$ what was the rate of interest charged for her investmeny

1. Suppose you wish to invest N$2,000 today so that you have N$6,000 six years from now. What must the annual interest rate be to achieve your goal if interest is compounded monthly? [4]


2. Assume that the current rate of inflation on housing is estimated at 10% per annum. Lydia's house is currently valued at N$ 450 000.

(a) How much could you expect to sell it for in 5 years? [3]

(b) Is it worthwhile to sell your house now or in five years, justify your answer? [2]


3. You want to buy a cellphone at the end of the year which will cost you N$ 4500. Assume on 1 January 2020 you open up a Unit trust which pays 6.5% interest per month. How much should you invest (starting from January) to yield N$4500 in December 2020? [4]


4. According to a survey carried out in 2019, the biomass of crabs in a particular region was estimated to be 5 350 MT. In 2014, the biomass was estimated to be 3 897 MT. Calculate the annual rate of growth of the crab’s population? [4]