Comparing two investment options

Assignment Help Business Economics
Reference no: EM131004527

You are comparing two investment options: you can purchase a 5-year bond with 10% coupon rate from company ABC or put the purchase price of the bond into a 5 year bank CD what pays 5% interest rate. Assuming that both investments have the same risk, the bond is valued fairly (its price is calculated using present value) and you prefer the investment with the biggest return, a. You should purchase the bond, you will make more money b. You should put the money in the CD, you will make more money c. You are indifferent between the investment options d. Neither, you should put your money in the stock market Can someone explain why C is the correct answer please

Reference no: EM131004527

Questions Cloud

Independent of the probability that the high temperature : In May in Huntsville, the high temperature exceeded 80°F on 20 days. It rained on 8 days when the high temperature was over 80°F. If we choose any day in May, the probability that it rained on that day is independent of the probability that the high ..
Discuss how an imperfectly competitive firm resorts : Perfect Competition is a model of which examples are few and far between. Yet economists love to discuss this model. Explain why. Discuss how an imperfectly competitive firm resorts to price discrimination to maximize its profits.
Fed has reduced the discount rate several times : In the United States, the Federal Reserve frequently engages in buying and selling of the government securities as well as other policies. In recent years, the Fed has reduced the Discount Rate several times. The Fed has also purchased substantial am..
Comparing two investment options : You are comparing two investment options: you can purchase a 5-year bond with 10% coupon rate from company ABC or put the purchase price of the bond into a 5 year bank CD what pays 5% interest rate. Assuming that both investments have the same risk, ..
Across most of your production volume capability : You compete with many firms offering similar products (monopolistic competition). An economic consulting firm has estimated the own-price elasticity for your most profitable product is -1.50. Your marginal cost is constant at $75 across most of your ..
To increase the money supply-the federal reserve : Suppose that the required reserve ratio is 10% and banks have no excess reserves. The total demand deposit in the system is $100,000. Now the monetary authorities lower the required reserve ratio to 5%. Which of the following will likely follow? Expa..
Business side drives things : Some would argue that the business side drives things. Business drives employment which permits consumers to consume. Would you agree?
Election everything would have been different : Comment on the following statement: “If John McCain had won the 2008 election everything would have been different.” What would have been different? Would that be a good or bad thing? Would anything be the same? What if Mitt Romney had won the 2012 e..

Reviews

Write a Review

Business Economics Questions & Answers

  Contrast the policy approaches of TSCA and FIFRA

Critically compare and contrast the policy approaches of TSCA and FIFRA. In your view, which of these is more effective in preventing pollution? Explain.

  Elucidate how would you price these two events differently

Demand for sporting events is uncertain, and depends on the quality of the match, as well as on unpredictable events, like the weather. Elucidate how would you price these two events differently.

  Natural monopoly has an incentive to pad

A natural monopoly has an incentive to pad its cost of production under which type of regulation?

  Higher than the canadian inflation rate

If the inflation rate in the United States rises to a point that it is higher than the Canadian inflation rate, all else equal, predict the impact on: 1. the U.S. demand for Canadian dollars? 2. the supply of Canadian dollars? 3. the equilibrium valu..

  Marginal cost of public spending from economic perspective

What is included in the true marginal cost of public spending from an economic perspective? Briefly explain why government spending typically grows faster than economic output.

  Preparing them better for a global society

Identify three changes that American society is undergoing, and discuss how those changes are reflected in schools? How can you as a teacher become better prepared for the cross-cultural differences that you are certain to encounter among students? H..

  Utility function-who has the same preferences as jim

Jim’s utility function is U(x, y) = xy. Jerry’s utility function is U(x, y) = 1, 000xy + 2, 000. Tammy’s utility function is U(x, y) = xy(1 − xy). Oral’s utility function is U(x, y) = −1/(10+ 2xy). Who has the same preferences as Jim? Who has the sam..

  Analyze a balanced budget increase

Suppose that Congress passes a constitutional amendment requiring the U.S. government to maintain a balanced budget at all times. Thus, if the government wishes to change government spending, it must always change taxes by the same amount, that is "G..

  Compute the utility and mrs of c

Compute the utility and MRS of C and F prior to exchange. Based on these MRS values, can C and F gain from exchange? If so, briefly explain how they would exchange.

  Contraction monetary policy work in principle

How do the instruments of contraction monetary policy work in principle.

  Is that equation unique

You buy only apples and bananas. Your budget is such that you can purchase 3 apples and 4 bananas or 9 apples and 2 bananas. Write down the equation for the budget line with bananas on the y-axis. Is that equation unique?

  American firms commonly invest in securities overseas

American firms commonly invest in securities overseas. Analyze the situation in which firms anticipate a currently weak dollar to strengthen in the near term. How would you expect this assessment to change American firms’ level of overseas investment..

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd