Question

You have $5,000 to invest for the next year and are considering the alternatives, which is...

You have $5,000 to invest for the next year and are considering the alternatives, which is the best choice? Show your work, explain your answer

1) A money market fund with an average maturity of 30 days offering a current yield of 2.0% per year

2)A 1-year savings deposit at a bank offering an interest rate of 4.0%

3)A 20-year U.S. Treasury bond offering a yield to maturity of 4.0% per year

4)A 20-year corporate bond offering a yield to maturity of 7.

Homework Answers

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
You have $5,000 to invest for the next year and are considering three alternatives: A money...
You have $5,000 to invest for the next year and are considering three alternatives: A money market fund with an average maturity of 30 days offering a current yield of 6% per year. A 1-year savings deposit at a bank offering an interest rate of 7.5%. A 20-year U.S. Treasury bond offering a yield to maturity of 9% per year. What role does your forecast of future interest rates play in your decisions? 500 words
You want to invest a sum of money for two years and have two alternatives: Alternative...
You want to invest a sum of money for two years and have two alternatives: Alternative 1: 3-year 5% coupon AAA bond selling at a par. Alternative 2: A AAA bank deposit which pays according to the following rates: 1 year spot rate 4.0% 1 year forward rate one year from now 4.5% 1 year forward rate two years from now 5% Analyse the alternatives to determine which one is the better deal.
You want to invest 50.000 TL at the beginning of each year for the next 6...
You want to invest 50.000 TL at the beginning of each year for the next 6 years. You have got following options: If you deposit your money in the bank, you get 6% interest income per year. Also, if you invest your money in a 3-year government bond, you can get 5.5% per year and have a current market price equal to 92% of face value. However, the government deducts 12% tax per year from the interest income you get...
You want to invest 40.000 TL at the beginning of each year for the next 5...
You want to invest 40.000 TL at the beginning of each year for the next 5 years. You have got following options: If you deposit your money in the bank, you get 5% interest income per year. Also, if you invest your money in a 3-year municipal-bond, you can get 6.5% per year and have a current market price equal to 104% of face value. However, the government deducts 12% tax per year from the interest income you get from...
You have $5,000 to either spend or invest in a 5 year Treasury note. Which would...
You have $5,000 to either spend or invest in a 5 year Treasury note. Which would you choose? Why?
"You have $5,000, which you want to invest in shares of firm A. The firm has...
"You have $5,000, which you want to invest in shares of firm A. The firm has no debt but you prefer 50% debt. If the stock price is $50 per share, how can you create your homemade leverage?" Buy 50 shares with your own money and lend $2500. "Invest $2,500 in stocks of firm A and $2,500 in its bonds. " "Invest $5,000 in bonds of firm A. " "Borrow $5,000 and invest in 200 shares of firm A. "
A person wants to invest $25,000 for 3 years and is considering two different investments. The...
A person wants to invest $25,000 for 3 years and is considering two different investments. The first investment, a money market fund, pays a guaranteed 6.4 % interest compounded daily. The second investment, a treasury note, pays 6.6% annual interest. Which investment pays the most interest over the 3 -year period? Select the correct choice below and, if necessary, fill in any answer box(es) to complete your choice. (Do not round until the final answer. Then round to the nearest...
You are considering buying a 10-year U.S. Treasury bond at the upcoming Treasury auction. Assume that...
You are considering buying a 10-year U.S. Treasury bond at the upcoming Treasury auction. Assume that the bond has the following features: coupon rate: 3.88%, with semi-annual coupon payments Face value: $1,000 matures in 10 years In the auction, the annual yield to maturity determined by the auction is 2.51%. What is the price that you will pay for this bond? Do not round at intermediate steps in your calculation. Round your answer to the nearest penny. Do NOT include...
1. A one-year discount bond promises to pay 132,000 dollars next year. Brad requires a 20%...
1. A one-year discount bond promises to pay 132,000 dollars next year. Brad requires a 20% rate of return from this bond. In other words, if he thinks that the rate of return from this bond is less than 20%, he will not buy it. Another way of saying the same thing is that, Brad is not willing to pay a penny more than ______ dollars for this bond. 2. Suppose that a special bank account is paying an annual...
Suppose the inflation rate is expected to be 6.3% next year, 4% the following year, and...
Suppose the inflation rate is expected to be 6.3% next year, 4% the following year, and 3.5% thereafter. Assume that the real risk-free rate, r*, will remain at 1.55% and that maturity risk premiums on Treasury securities rise from zero on very short-term bonds (those that mature in a few days) to 0.2% for 1-year securities. Furthermore, maturity risk premiums increase 0.2% for each year to maturity, up to a limit of 1.0% on 5-year or longer-term T-bonds. Calculate the...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT