Assume that over the past 88 years, U.S. Treasury bills had an average return of 3.5% as compared to 6.1% on long-term government bonds. What was the average risk premium on the long-term government bonds?
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Assume that over the past 88 years, U.S. Treasury bills had an average return of 3.5% as compared to 6.1% on long-term government bonds. What was the average risk premium on the long-term government bonds?
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- Consider the following information on different asset classes from 1926 through 2020. Arithmetic Mean 12.2% 16.2 6.5 6.1 5.3 3.3 2.9 Series Large-company stocks Small-company stocks Long-term corporate bonds Long-term government bonds Intermediate-term government bonds U.S. Treasury bills Inflation a. What is the real return on long-term government bonds? Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16. b. What is the real return on long-term corporate bonds? Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16. a. Real return b. Real return % %Suppose on January 15, 2018, the U.S. Treasury issued a ten-year inflation indexed note with a coupon of 7%. On the date of issue, the CPI (consumer price index) was 215. By January 15, 2028, the CPI index had decreased to 165. What principal and coupon payment was made on January 15, 2028? (Note: U.S. Treasury pays semi-annual coupons) The CPI index deppreciated by The principal payment is $ The coupon payment is $ . (Round to five decimal places.) (Round to the nearest cent.) (Round to the nearest cent.)The inflation rate in the United States has averaged 3% a year since 1900. Use the data in the table below to answer the following question: Average rates of return on Treasury bills, government bonds, and common stocks, 1900–2020. Portfolio Average Annual Rate of Return (%) Average Premium (Extra return versus Treasury bills) (%) Treasury bills 3.7 Treasury bonds 5.4 1.7 Common stocks 11.5 7.8 What was the average real rate of return on Treasury bills, Treasury bonds, and common stocks in that period? Note: Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places.
- BhupatbhaiDiscuss the 10-year Bond rate of UK government as proxy of risk-free rate.A difference of 6% is observed for the nominal rate of two securities, a 10-year long-term corporate and a 10-year long-term government. Maturity risk premium increases by 0.5% per year of maturity. Quoted rates for short-term government securities as proxy for the risk-free rate is 4%. What is the nominal rate for the 10-year long term corporate security? (In percentage)
- The overnight fed funds rate on May 20, 2016 was 0.37 percent . Compute the bond equivalent rate and the annual return on the fed funds as of May 20, 2016.A BBB-rated corporate bond has a yield to maturity of 10.8%. A U.S. Treasury security has a yield to maturity of 9.5%. These yields are quoted as APRs with semiannual compounding. Both bonds pay semiannual coupons at an annual rate of 10.2% and have five years to maturity. a. What is the price (expressed as a percentage of the face value) of the Treasury bond? b. What is the price (expressed as a percentage of the face value) of the BBB-rated corporate bond? c. What is the credit spread on the BBB bonds? a. What is the price (expressed as a percentage of the face value) of the Treasury bond? The price of the Treasury security as a percentage of face value is $________________ (Round to two decimal places.)Based on economists' forecasts and analysis, 1-year Treasury bill rates and liquidity premiums for the next four years are expected to be as follows: R1 = 1.00% E(271) = 2.15% L2= 0.05% E(351) = 2.25% L3= 0.10% E(471) = 2.55% L4= 0.12% Using the liquidity premium theory, determine the current (long-term) rates. Note: Do not round intermediate calculations. Round your percentage answers to 2 decimal places (i.e., 0.1234 should be entered as 12.34). Years 1 2 3 4 Current (Long-term) Rates
- According to the Financial Times, the below maturities and yield-to-maturities were observed for U.S. Treasury bills and notes: Bonds Bonds & rates overview Gov Yields Maturity Yield 1 Month 0.10% 3 Month 0.12% 6 Month 0.15% 2 Year 0.16% 5 Year 0.33% 10 Year 0.68% 30 Year 1.39% What is the shape of this yield curve? ○ Inverted. ● Steepening. Flattening. O Normal. Cannot be determined from question.Consider the following table for an eight-year period: Year 1 2345678 T-bill return Inflation 7.40% 8.60% 8.59 12.23 5.98 6.83 5.62 4.97 5.56 6.59 8.19 8.91 10.67 13.18 12.65 12.41 a. Calculate the average return for Treasury bills and the average annual inflation rate (consumer price index) for this period. (Do not round Intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) b. Calculate the standard deviation of Treasury bill returns and inflation over this time period. (Do not round Intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) c. Calculate the real return for each year. (A negative answer should be Indicated by a minus sign. Leave no cells blank - be certain to enter "O" wherever required. Do not round Intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) d. What is the average real return for Treasury bills? (A negative…Consider the following table for a seven-year period: Year 1 2 3 4 5 6 7 U.S. Treasury Bills 3.45% 3.30 4.20 4.62 2.42 1.30 1.03 Returns Average real return Inflation -1.15% -2.29 -1.19 0.61 -6.43 -9.35 -1.30 What was the average real return for Treasury bills for this time period? Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16. %