Xerox just issued two bonds. The 1st Bond is a zero coupon bond with 30 year to maturity. The 2nd Bond is a 10% coupon bond with 10 year to maturity. Assume that other characteristics of these two bonds are the same (e. g., the same YTM). You expect that the Fed will announce a decrease of benchmark interest rate. Which bond do you want to purchase in order to earn higher return around the incoming interest rate change?A) The 1st bond issued by Xerox. B) The 2nd bond issued by Xerox.

An insurance company estimates the probability of an earthquake in the next year to be 0.0015. the average damage done to a house by an earthquake it estimates to be $90,000. if the company offers earthquake insurance for $150, what is company`s expected value of the policy? hint: think, is it profitable for the insurance company or not? will they gain (positive expected value) or lose (negative expected value)? if the expected value is negative, remember to show "-" sign. no "+" sign needed for the positive expected value