Under a Semi-Annual Compounding Convention, the Present Value of A n

question 3

Multiple Choice

Under a semi-annual compounding convention, the present value of a $n$ -period cashflow using its ytm $y$ is given by $P = C / ( 1 + y / 2 ) ^ { n }$ . Which of the following is an equivalent way of expressing the same present value?

• A) \(P = C \cdot d _ { n } \cdot ( n / 2 )\) , where \(d _ { n }\) is the discount function for \(n\) periods, and \(n / 2\) is the time to maturity of the cash-flow.
• B) \(P = C e ^ { - z _ { n } \times n / 2 }\) , where \(Z _ { n }\) is the semi-annual basis zero-coupon rate for \(n\) periods.
• C) \(P = C / \prod _ { j = 1 } ^ { n } \left( 1 + f _ { j } \right)\) , where \(f _ { j }\) is the forward rate for period \(j\) .
• D) None of the above.

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Definitions:

Unemployment Spells

Periods during which an individual is without work but is available for and seeking employment.

Unemployed Person

An individual who is capable of working, actively seeking work, but unable to find a job.

U-3 Measure

A specific unemployment rate measure that counts the number of unemployed individuals who are actively seeking employment as a percentage of the labor force.

Official Unemployment Rate

The percentage of the labor force that is jobless and actively seeking employment, as determined by government statistics.