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With a Series EE bond, you pay a particular amount today of, say, $25, and the bond accrues interest over the time you hold it. In early 2012, the U.S. Treasury promised to pay .60 percent per year on EE savings bonds. In an interesting (and important) wrinkle, if you hold the bond for 20 years, the Treasury promises to “step up” the value to double your cost. That is, if the $25 bond you purchased and all the accumulated interest earned is worth less than $50, the Treasury will automatically increase the value of the bond to $50.
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In 2022, instead of cashing the bond in for its then current value, you decide to hold the bond until it doubles in face value in 2032. What rate of return will you earn over the last 10 years? (Enter rounded answer as directed, but do not use rounded numbers in intermediate calculations. Enter your answer as a percent rounded to 2 decimal places (e.g., 32.16).)
Suppose that the current level of the Standard & Poor's Index is 1100. The prospective dividend yield on S&P500 stocks is 3%, and the risk-free interest rate is 2%. What is the value of a one-year futures contract on the index?
Mexican interest rates are normally substantially higher than U.S. interest rates. What does this imply about the inflation differential (Mexico inflation minus U.S. inflation), assuming that the peso interest rate is the same in both countries? Doe..
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The constant dividend growth model:
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