Business, 11.02.2021 22:10 brcribb

The bonds in our model have a maturity close to zero; they just pay the current interest rate, i, as a flow over time. We could consider, instead, a discount bond, such as a U. S. Treasury Bill. This type of asset has no explicit interest payments (called coupons) but pays a principal of, say, $1000 at a fixed date in the future. A Bill with one- year maturity pays off one year from the issue date, and similarly for 3-month or 6-month Bills. Let PB be the price of a discount bond with one-year maturity and principal of $1000. a. Is PB greater than or less than $1000. a. Is P^B greater than or less than $1000?
b. What is the one-year interest rate on these discount bonds?
c. If prises, what happens to the interest rate on these bonds?
d. Suppose that, instead of paying $1000 in one year, the bond pays $1000 in two years. What is the interest rate per year on this two-year discount bond?

Answers: 1

Show answers

Other questions on the subject: Business

Business, 22.06.2019 11:00, ashlynmartinezoz2eys

When the federal reserve buys bonds from or sells bonds to member banks, it is called monetary policy reserve ratio interest rate adjustment open market operations

Answers: 1

continue

Business, 22.06.2019 14:30, 20guadalupee73248

The face of a company is often that of the lowest paid employees who meet the customers. select one: true false

Answers: 1

continue

Business, 22.06.2019 22:10, jeanieb

Consider the labor market for computer programmers. during the late 1990s, the value of the marginal product of all computer programmers increased dramatically. holding all else equal, what effect did this process have on the labor market for computer programmers? the equilibrium wagea. increased, and the equilibrium quantity of labor decreased. b. decreased, and the equilibrium quantity of labor increased. c. increased, and the equilibrium quantity of labor increased. d. decreased, and the equilibrium quantity of labor decreased.

Answers: 3

continue

Business, 23.06.2019 07:00, rosehayden21

Nthis economy, community members typically use simple tools to plant and harvest crops. food supplies are supplemented by hunting animals and gathering plant materials. members trade with each other to obtain needed goods, as few people hold currency. little economic growth occurs. what type of economy is being described?

Answers: 3

continue

You know the right answer?

The bonds in our model have a maturity close to zero; they just pay the current interest rate, i, as...