subject
Business, 17.04.2021 17:40 zayzay162

Today is period 0, and the length between the periods is one year. In the fixed-income securities market you observe following three securities. An investor can buy or sell fraction of a fixed-income security. Security A: It is a zero-coupon bond. It matures in period 1, and it has a face value of $100. It can be bought or issued at a current price of $X.

Security B: It is a zero-coupon bond. It matures in period 2, and it has a face value of $1,000. It can be bought or issued at a current price of $860.71.

Security C: It is a forward contract. The contract matures on period 1, and the forward price is $92.312. The security underlying the forward contract matures on period 2 with a face value of $100. You may go short (sell) or long (buy) on this contract. [Hint: At t=0 if you buy a forward contract, then you will pay $92.312 at the end of year 1 (t=1), and then you will receive $100 at the end of year 2 (t=2).]

Assuming that Security B and Security C are priced correctly in the market. Then, as per you under the no-arbitrage principle, what should be the fundamental value of Security A, i. e., what is X?

[Round-off to at least four decimal places.]

ansver
Answers: 2

Other questions on the subject: Business

image
Business, 22.06.2019 06:00, esnyderquintero
Cash flow is often a problem for small businesses. how can an entrepreneur increase cash flow? a) locate lower-priced suppliers. b) forego sending in estimated tax payments to the irs c) shorten the terms on a bank loan to pay it off more quickly d) sell more low-margin items.
Answers: 1
image
Business, 22.06.2019 09:30, emfranco1
Which are the best examples of costs that should be considered when creating a project budget?
Answers: 2
image
Business, 22.06.2019 11:00, PanjiUR9220
What is the correct percentage of texas teachers charged with ethics violations each year?
Answers: 2
image
Business, 22.06.2019 13:10, princessgabbee8452
Paid-in-capital in excess of par represents the amount of proceeds a. from the original sale of common stock b. in excess of the par value from the original sale of common stock c. at the current market value of the common stock d. at the curent book value of the common stock
Answers: 1
You know the right answer?
Today is period 0, and the length between the periods is one year. In the fixed-income securities ma...

Questions in other subjects:

Konu
Mathematics, 27.02.2020 19:10
Konu
Mathematics, 27.02.2020 19:10