Two grandparents are considering purchasing a baby bond for their first grandson. They are deciding between two bonds with the same face value of $42,000. Both bonds are offered at the same price of $37,000. Bond A has interest of 2.5% per year, payable quarterly, and matures in 6 years. Bond B, issued 2 years ago, has interest of 2.75% per year, payable semiannually, and a 8- years maturity date. If the current market rate is 3% per year, compounded quarterly, which bond should be purchased?n

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Select two of the stock series from the 'CAPM.XLS' Excel file, construct a set of continuously compounded returns, and then perform a time-series analysis of these returns. The analysis should include (a) An examination of the autocorrelation and partial autocorrelation functions. (b) An estimation of the information criteria for each ARMA model order from (0,0) to (5,5). (c) An estimation of the model that you feel most appropriate given the results that you found from the previous two parts of the question. (d) The construction of a forecasting framework to compare the forecasting accuracy of i. Your chosen ARMA model ii. An arbitrary ARMA(1.1) iii. An single exponential smoothing model iv. A random walk with drift in the log price levels (hint: this is easiest achieved by treating the returns as an ARMA(0,0) - i.e. simply estimating a model including only a constant). (e) Then compare the fitted ARMA model with the models that were estimated in chapter 4 based on exogenous variables. Which type of model do you prefer and why? Select two of the stock series from the 'CAPM.XLS' Excel file, construct a set of continuously compounded returns, and then perform a time-series analysis of these returns. The analysis should include (a) An examination of the autocorrelation and partial autocorrelation functions. (b) An estimation of the information criteria for each ARMA model order from (0,0) to (5,5). (c) An estimation of the model that you feel most appropriate given the results that you found from the previous two parts of the question. (d) The construction of a forecasting framework to compare the forecasting accuracy of i. Your chosen ARMA model ii. An arbitrary ARMA(1.1) iii. An single exponential smoothing model iv. A random walk with drift in the log price levels (hint: this is easiest achieved by treating the returns as an ARMA(0,0) - i.e. simply estimating a model including only a constant). (e) Then compare the fitted ARMA model with the models that were estimated in chapter 4 based on exogenous variables. Which type of model do you prefer and why?

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When choosing between two bonds investors typically compare the yield to maturity of e... View the full answer