Problem 1. (10 points) Consider a set of wooden beams. We kn…

Problem 1. (10 points) Consider a set of wooden beams. We know that 35% of the set shows a tensile strength above 60 N/mm2. 4/5 of the 35% have a young’s modulus higher than 16,000 N/mm2. From the other 65% with a tensile strength below 60 N/mm2, only 1/3 have the young’s modulus higher than 16,000 N/mm2. If we have a timber beam with a young’s modulus higher than 16,000 N/mm2, what is the probability that this beam has a tensile strength above 60 N/mm2? Write down the obtained probability value.  

Assume that the one-period spot interest rate is 3 percent a…

Assume that the one-period spot interest rate is 3 percent and the two-period spot interest rate is 6 percent. A two-period coupon-bearing bond has an annual coupon of $5.00 and par value of $100. Suppose that you buy this bond in the forward market for delivery one year from now. What should be its price?