Suppose initially that two assets, A and B, will each make a single guaranteed p
ID: 1114165 • Letter: S
Question
Suppose initially that two assets, A and B, will each make a single guaranteed payment of $200 in one year. But asset A has a current price of $170 while asset B has a current price of $190.
Instructions: Round your answers to 2 decimal places.
a. What are the rates of return of assets A and B at their current prices?
Return on asset A =
Return on asset B =
Next, consider another pair of assets, C and D. Asset C will make a single payment of $300 in one year, while D will make a single payment of $400 in one year. Assume that the current price of C is $250 and that the current price of D is $370.
c. What are the rates of return of assets C and D at their current prices?
Return on asset C =
Return on asset D =
Explanation / Answer
Return on asset A =200/170-1=17.65%
Return on asset B =200/190-1=5.26%
Return on asset C =300/250-1=20%
Return on asset D =400/370-1=8.11%
the above is answer