As of November 14, 2023, Treasury yields were as follows: 1-year 5.24% 2-year 4.80% 3-year 4.56% 5-year 4.42% 10-year 4.44% 30-year 4.61% What do the rates above imply about the shape of the yield curve?
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- Table 5.1 1 year 2 years З years 1.50% 2.25% 3.25% Table 5.1 shows the interest rates for Treasury securities of different maturities. Assume that the liquidity premium theory is correct. 103) Refer to Table 5.1 On this day, what did investors expect the interest rate to be on the one -year 103) Treasury bill in two years if the term premium on a two-year Treasury note is 0.25%? A) 1.875% B) 2.25% C) 2.375% D) 2.5% 104) Refer to Table 5.1 On this day, what did investors expect the interest rate to be on the one-year Treasury bill in two years if the term premium on a two-year Treasury note is 0.25% and the term premium on a three-year Treasury note is 0.75%? A) 2.375% 104) B) 3.25% C) 3.50% D) 4.75%A 30-year maturity bond with face value of $1,000 makes semiannual coupon payments and has a coupon rate of 8%. Note: Do not round intermediate calculations. Enter your answers as a percent rounded to 3 decimal places. What is the yield to maturity if the bond is selling for $900? What is the yield to maturity if the bond is selling for $1,000? What is the yield to maturity if the bond is selling for $1,100?12. Treasury Bills (LO1, CFA2) A Treasury bill purchased in December 2016 has 55 days until maturity and a bank discount yield of 2.48 percent. What is the price of the bill as a percentage of face value? What is the bond equivalent yield?
- The Bangladesh Bank has created additional money worth Tk70,794 crore through various refinance schemes and easing regulatory requirements after the Covid-19 outbreak in March for stimulating demand to revive the declining economy.” (link: https://tbsnews.net/economy/banking/bangladesh-bank-creates-money-worth-over-tk70000cr-revive-economy-76435?fbclid=IwAR108OXKcbXq6JjZj6v9FbULrDtys_QsZySUTKeAmauoqTjppgnLqU89muw#.Xq5kdXhgRqq.facebook). What type of monetary policy is this? Expansionary or contractionary? Draw a diagram to explain your answerDraw the supply and demand curves for the bond and explain what will happen to the equilibrium price and quantity of the bond for each of the following situations: a) The inflation rate is expected to increase. b) The wealth of economic agents in the economy increases, but at the same time, the Ministry of Finance increases the corporate income tax rate. c) The economy is experiencing expansion. d) The government runs a budget deficit. e) Most corporate bonds (ratings) have been downgradedThe following are data on the Treasury yield curve for July 17, 2012: Time to maturity Interest rate 6 months 0.15% 1 year 0.18% 2 years 0.25% 5 years 0.62% 10 years 1.53% 30 years 2.59% Source: U.S. Department of the Treasury, "Daily Treasury Yield Curve Rates," July 17, 2012. Given these data, why would an investor have been willing to buy a one-year Treasury bill with an interest rate of only 0.18% when the investor could have bought a 30-year Treasury bond with an interest rate of 2.59%? O A. An investor would expect interest rates on short-term bonds to be higher in the future. O B. Investors are exposed to greater interest-rate risk when they buy long-term bonds versus buying short-term bonds. OC. Most investors have a life expectancy for investing purposes of less than 30 years. O D. A andB only. O E. All of the above.
- 2.The present value (PV) of a certain monetary investment asset Mo, with yield Mt over a time period t, is given by the relationship: PV = Mt/(1+n)'. Explain the role that the parameter n plays in determining the eventual terminal value of this monetary investment.What is the discount yield, bond equivalent yield, and effective annual return on a $7 million commercial paper issue that currently sells at 98.75 percent of its face value and is 122 days from maturity? (Use 360 days for discount yield and 365 days in a year for bond equivalent yield and effective annual return. Do not round intermediate calculations. Round your percentage answers to 3 decimal places. (e.g., 32.161))The demand D (in billions of £) for a bond with coupon rate 5% and face value FV = 1000, and two years to maturity as a function of its price P is D = 4000 − 2P. The supply in (billions of £)as a function of the price of the bond is S = 2P + 400. b) Suppose that the yield to maturity of the bond is i = 0.05. What is the quantity demanded/supplied at this interest rate? What happens to the demand/supply of the bond as the interest rate increases? Explain why. c) What is the equilibrium interest rate? d) Suppose that the bond trades at premium. Is there excess demand or supply? Explain. e) There is a business cycle contraction, so both supply and demand shifts. After the shift, the new demand curve is given by: D = 4000 + X − 2P , whereas the new supply curve is S = 2P + 200. For which values of X will the interest increase/decrease? Which values of X are in line with empirical data? Please show all the steps and equations used to get to the answers.
- Below you will find the Demand and Supply Curves for $250,000 bonds that mature in 18 years: Qd = 400,000 – 2(P) Qs = 3(P) – 100,000 What is the current equilibrium interest rate in that bond market?Rework part (f), assuming that Annie holds the bond for 10 years and sells it when the required return is 7.0%. Compare your finding to that in part (f), and comment on the bond's maturity risk. PV= 1,000 N=10 I/Y= 7% Assume that Annie buys the bond at its current price of $983.80 and holds it until maturity. What will her current yield and yield to maturity (YTM) be, assuming annual interest? After evaluating all of the issues raised above, what recommendation would you give Annie with regard to her proposed investment in the Atilier Industries bonds?Calculate the present value of a $1,300 discount bond with 6 years to maturity if the yield to maturity is 5%. The present value is $ (Round your response to two decimal places.)