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The distinction between bond M and N is blur! Anyway, this is a very elementary valuation question. Say after T years, you will get paid - S units of money. Then the present value would be, $\frac {S}{(1+r)^T}$. Where $r$ is your rate of interest rate. I have assumed that the interest rate is flat with time (term structure is flat). If it is not the case, ...

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Answer: Bond Price = P = $$\frac{1200}{1.06^6}+\frac{1200}{1.06^7}+\cdots+\frac{1200}{1.06^{13}}+\frac{1500}{1.06^{14}}+\frac{1500}{1.06^{15}}+\cdots+\frac{21500}{1.06^{20}} = 15731$$ Thanks Satish

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In a complete market the absence of arbitrage implies the existence of an equivalent probability measure under which asset prices are martingales. The fair value of a derivative security that can be replicated with a dynamic hedging strategy can then be determined as an expected value under this measure. Proving this in a continuous-time stochastic ...

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The following paper discusses the three commonly known numerical methods, Bisection, Newton-Raphson and Secant on their rate of convergence and computational efficiency. I hope this helps. http://www.jcbsc.org/journal/Paper/Vol_2_I_1_2011/V2I1_P4.pdf

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There will surely be more than one solution, since it is highly unlikely that you have as many products as you have equations (i.e. 1 product). Therefore it is not a problem of solving this equation rather than finding an optimal set of prices $\left(x_1,\cdots,x_n\right)$. Solution 1 The "optimality" of this set will be defined by what is called an ...

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I think we can represent the desired criteria with the following system of equations $$x_1 + x_2 + \cdots + x_n = b$$ and to enforce "reflection of the $a_i$" (assuming all $a_i$ are non-zero), we have $$x_1/a_1 = x_2/a_2 = \cdots = x_n/a_n$$ Which gives us a system of $n$ equations on $n$ variables, which will have a unique solution. We can find the ...

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