You are an Assistant Analyst in a financial institution in your Country. Your company is interested in analyzing the behaviour of interest rates and the models used to predict interest rates in the future. As an initial project in this area, you have been assigned the task of creating a presentation that will show, the top management team assigned this project, the basics of what affects interest rates and how equilibrium prices change over time. Your successful presentation to this group is likely to eam you a promotion to an Analyst position within the team. To begin your work, you have decided to identify a series of questions that you think this team will ask, including tables and graphs that will satisfy their concerns about the final presentation to the Chief Financial Officer (CFO). You decided to start by answering the following questions, assuming that the face value of a discount bond is $1,000 and the time to maturity is one year. What is the expected return for this bond if the market price is: a $7002 b. $750? c. $850?
Mini Case Overview
You are an Assistant Analyst in a financial institution in your Country. Your company is interested in analyzing the behaviour of interest rates and the models used to predict interest rates in the future. As an initial project in this area, you have been assigned the task of creating a presentation that will show, the top management team assigned this project, the basics of what affects interest rates and how
What is the expected return for this bond if the market price is:
a $7002
b. $750? c. $850?
d. $9002 e. $1000?
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