Assume the data shown below. What tax rate would make the law of one price hold? Assume that the capital gains tax is one-half the ordinary income tax. Assume that the periods shown are annual and that any capital gain or loss is realized at the time the bond matures.
Answer to relevant QuestionsAssume your preference function P is P = C1 + C2 + C1C2. Plot the location of all points with P = 50, P = 100. Consider a bond with semiannual coupon payments of $50, a principal payment of $1,000 in 5 years, and a price of $1,000. Assume that the yield curve is a flat 10%. What is the duration of the bond? A registered representative recently advised one of his clients to sell calls on all the stock he owned. He explained that the client wouldn't lose money but would benefit by what he got paid for the call. Sounds foolproof. ...The spot rate (current rate) for Japanese yen is 120 yen to the dollar, whereas the one-year futures rate is 115. If one-year interest rates in Japan are 4%, what is the implied one-year interest rate in the United States, ...Assume that the zero-beta form of the capital asset pricing model (CAPM) is appropriate. What is the differential return for the funds shown in Problem 1 if Rz = 4%? In Problem 1
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