You are looking at a 1 year instrument that pays a 4%p.a. yield, there is also an instrument that is paying a 6% yield that is a ten year debt instrument. Firstly, how do you determine/acknowledge the difference in the yield in general? Secondly, make a zero cost strategy for a period of 10 years in order to see a profit with the two instruments ($1000 reference size and you wont pay from your pocket). Whats the profit you make during the period? Is this profit risk free?

Please help me stepwise sir thanks a lot. For both the alternative find and also tell which is best.

Consider two 1-year loans with a principal of $1 million and a default probability of 2% each. Assume that if one loan defaults, the other does not. Assume that in the event of default, the loan leads to a loss that can take any value between $0 and $1 million with equal probability, i.e., the probability that the loss is higher than $x million is 1-x. If a loan does not default, it yields a profit equal to $0.02 million. a) Compute the 1-year 99% Value at Risk (VaR) and Expected Shortfall (ES) of a single loan. b) Compute the 1-year 99% VaR and ES for the portfolio of both loans. c) Does the VaR and the ES satisfy the subadditivity property in this case?

Please answer the following showing detailed working: Bruce & Co. expects its EBIT to be $100,000 every year forever. The firm can borrow at 11 percent. Bruce currently has no debt, and its cost of equity is 18 percent. The tax rate is 31 percent. Given the above information; a) Complete the table given below for varying levels of debt below by using a mix of the given information and using your own computations. EBIT $100,000.00       Cost of debts 11%       cost of equity when unlevered 18%       Tax rate 31%       Debts $0 $10,000.00 $20,000.00 $30,000.00 Cost of Equity when levered         Equity         D/E         Vu         VL         WACC         b) Plot the results from the table into the following two graphs:i) Value of the firm vis-à-vis- Total debtii) Cost of capital of the firm vis-à-vis D/E ratio.iii) Which MM propositions have you demonstrated?