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Assume that you recently graduated and landed a job as a financial planner with Cicero Services, an investment advisory company. Your first client recently inherited
Assume that you recently graduated and landed a job as a financial planner with Cicero Services, an investment advisory company. Your first client recently inherited some assets and has asked you to evaluate them. The client presently owns a bond portfolio with $million invested in zero coupon Treasury bonds that mature in years The client also has $ million invested in the stock of Blandy, Inc., a company that produces meatand potatoes frozen dinners. Unfortunately, Congress and the president are engaged in an acrimonious dispute over the budget and debt ceiling. The outcome of the dispute, which will not be resolved until the end of the year, will have a big impact on interests rates one year from now. Given this information, you have calculated the rate of return on year zero coupon Treasury bonds for each scenario. The probabilities are shown here: use the scenario data to calculate the expected rate of return for the year coupon Treasury bonds during next year.
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