AFM273 Study Guide - Midterm Guide: Making Money, Spot Contract, Annual Percentage Rate

• School: University of Waterloo
• Department: Accounting & Financial Management
• Course: AFM273
• Professor: Xuyang Ma

Document Summary

You can win either of these following choices: These tickets can be sold online for /ticket: 2 tickets to concert b, which is your favorite band (ticket face value /each) These tickets can be bought for /each. Market prices and not your personal preference (nor the face value of the. Tickets) are relevant: 4 tickets to concert a x $ 60 = , 2 tickets to concert b. Accept concert a, sell it and go to concert b. They can each invest ,000 today in return for a payoff of. Neil wants to spend as much as possible now, but. Sally want to defer spending for one year. After 1 year: ,000 x 1. 04 = ,000. Suppose there is a risk security a which pays if the economy is strong and sh if the economy is weak. Everything should be one price and be priced fairly. Risk free bond + security a = market index law of one price.