A company has issued 2- and 3-year bonds with a coupon of 4% per annum payable annually. The yields on the bonds (expressed with continuous compounding) are 4.5% and 4.75%, respectively. Risk-free rates are 3.5% with continuous compounding for all maturities. The recovery rate is 40%. Defaults can take place half way through each year (which means defaults can only happen at the end of June every year). The risk-neutral default probability per year is Q1 for year 1 to 2 and Q2 for year 3. Estimate Q1 and Q2.
Answer to relevant Questionsa. Describe the great contribution to Capital Market Theory by Harry Markowitz.b. Discuss how the presence of a risk-free security changes the shape of the efficient frontierConsider an economy described by the following equations:Y = C + I + G + NXY = 5,000G = 1,000T = 1,000C = 250 + 0.75 (Y – T)I = 1,000 – 50 rNX = 500 - 500εr = r* = 5a. In this economy, solve for national saving, ...Comparing Checking Account Balance: Based on the following information, determine the true balance in your checking account. Balance in your checkbook ......... $356Balance on bank statement .......... $472Service charge ...Consider a machine that fills soda bottles. The process has a mean of 15.9 ounces and a standard deviation of 0.06 ounces. The specification limits are set between 15.8 and 16.2 ounces.a) Compute and interpret the ...What effect does electroconvulsive shock have on memory?
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