ANSWERS

1-A- let’s calculate the spot rate

The PV is 841.78
841.78 = 0/(1+R) +0/(1+r)2+ +0/(1+r)3 +1000/(1+r)4
RS = 4.4%
The spot rate for 4 years is 4.40%

Let’s see the equation with A, B, C:

Bond A:
1,075.82 = 80/(1+r1) + 1.081(1+r2)
Bond B:
1,189.10 = 110/(1+r1) +110/(1+r2) +110/(1+r3)
Bond C:
$1,058.76 =n60/(1+r1) +60/(1+r2) +1.060/(1+r3) +1060/(1+r4)
Solving equations: r3= 4.20 r1= 3.50 r4= 4.40 r2= 4.00

2-How to gain billion without risk

The bond c is in low cost so we can buy them with certitude because
it’s under the normal price witch is the equilibrium…so the gain is for
sure.
It’s a safe investment that will in any case give back fortune and
money.
A-The bond strips
US treasury bonds 30 years
We can expect that the price will go up.

B- 5 years bonds
3- A-The rule 72 shows us that we will need 8 years and 6 months to
double our investment. Yes, it’s works.
B-No we can’t.
5-let’s calculate the PV
PV: 2000000*discount factor
:200000
The PV after the crash will be 400000 dollars.

Balla Moussa Diarra

Mountaga Coulibal