Answered: 3. BC Limited has a nominal cost of…

3. BC Limited has a nominal cost of capital of 12.65% per annum. The real interest rate is 8.0% per annum. What is the inflation rate? A 5.45% B 7.0% C 6.0% D 9.45%

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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4 - Based on economistsAc€?c forecasts and analysis, 1-year Treasury bill rates and liquidity premiums for the next four years are expected to be as follows: R1 = .90% E(2r1) = 2.05% L2 = 0.09% E(3r1) = 2.15% L3 = 0.12% E(4r1) = 2.45% L4 = 0.14% Using the liquidity premium theory, plot the current yield curve. Make sure you label the axes on the graph and identify the four annual rates on the curve both on the axes and on the yield curve itself. (Do not round intermediate calculations. Round your answers to 2 decimal places.) Year Current (Long-term) Rates 1 % 2 % 3 % 4 % 6 - On March 11, 20XX, the existing or current (spot) 1-, 2-, 3-, and 4-year zero coupon Treasury security rates were as follows: 1R1 = 0.90%, 1R2 = 1.50%, 1R3 = 1.90%, 1R4 = 2.05% Using the unbiased…
am. 233.
K The outstanding debt of Berstin Corp. has eight years to maturity, a current yield of 9%, and a price of $80. What is the pretax cost of debt if the tax rate is 30%. A. 7.5% B. 10.8 % OC. 6.5 % OD. more information needed
What is the real interest rate given a nominal rate of 8.7% and an inflation rate of 1.5%? A. 11.3% B. 8.5% C. 7.1% D. 9.9%
1 Roy's Welding's bond has an annual rate of return of 5.97 percent and a face value of $1,000. The current rate of inflation is 3.02 percent. What is the real rate of return on these bonds?
Subject:finance
Suppose the real rate is 8.5 percent and the Inflation rate is 2 percent. What rate would you expect to see on a Treasury bill? Multiple Cholce 9.60% 11.74% 9.07% 12.27% 10.67%
4. Suppose that the market rate of interest is 12 per cent on a government bond with a perpetuity payment, which is a coupon value (annual payment) of £6 per year indefinitely. The face value of the loan is £100. a) Define and calculate the price of the bond? Answers.. b) At what yield (or rate) will the loan be trading at par? Explain whether it is trading above or below par in a). Answers... c) Assume that the rate of interest is 'expected' to drop to 3 per cent, derive and calculate the rate of capital gain (or loss)? Answers . d) Derive and explain the expression for the number of bonds held representing the amount of money spent on bonds (B) with the corresponding mean rate of return (HR). Answers.. e) Imagine that W = £40,000, what is the amount spend on bonds, B', if the standard deviation (SD) of earnings (s) is equal to 0.10 with a 3,000,the SD of the total return on bonds, SR. What is the money holding, which is M*? Answers.. Find the mean return on bonds with u = 1. Answer..
1. The interest rate is 9.5% p.a. effective and the rate of inflation is 5.2% p.a. Compute the real rate of interest % Enter a percentage correct to 2 decimal places. 2. A Zero-Coupon Bond, with face value £100, that reaches maturity in 7 years sells for £66. The inflation rate is 5% p.a. effective. What is the real yield? % Enter a percentage correct to 2 decimal places.
How much should be paid for a Rs.1000 bond with 10% coupon per annum and five years to maturity if the current interest rate is 12% O a. Rs.927.90 O b. Rs.981.40 O c. Rs.1000.00 O d. Rs.1075.82

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