Financial Accounting Question need answer please Bond Y is a long-term bond with an 8% interest rate. Over the life of the bond, theaverage expected annual inflation rate is 2%. The bond's DRP is 2% and its LP is0.5%. The applicable maturity risk premium is 1%. What is the real risk-free rate?a. 1.5%b. 2.0%c. 2.5%d. 3.0%e. 3.5%

Step 1: Define Real Risk-free RateThe real risk-free interest rate refers to the anticipated…

Answered: Bond Y is a long-term bond with an 8%…

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter4: Bond Valuation

Section: Chapter Questions

Problem 11MC

See similar textbooks

Similar questions

What is the reat risk free rate on these financial accounting question?
Assume that the real risk free rate is 3% and the average annual expected inflation rate is 5%. The DRP and LP for Bond A are each 1% and the applicable MRP is 2%. What is bond A’s interest rate?
Assume the real risk-free is 1% and the average annual expected inflation rate is 4%. The DRP and LP for bond A are each 3%, and the applicable MRP is 3%. What is Bond A's interest rate?
Bonds have a maturity risk premium that can be modeled as the following:MRP = (t-1) 0.3%were t represents the years to maturity. What is the Maturity risk premium of a bond that matures in 8 years? answer in % without the symbol
Suppose the real risk-free rate of interest is 2%. Inflation is expected to be 2% for 2 years and then 3% thereafter. The maturity risk premium is 0.2% (t). where t is the number of years until maturity. The default risk premium is 2%. The liquidity premium is 1%. What is the nominal interest rate on a 4 year bond? 9.1% 7.8% 7.1%
Consider a 10-year bond with a face value of $1,000 that has a coupon rate of 5.8%, with semiannual payments.
Assume that the real risk free rate is 2% and the average expected inflation rate is 3% for each future year. The default risk premium and the liquidity premium for bond x are each 1% and the applicable Maturity Risk premium is 2% what is bond x’s interest rate. Round to 2 decimal places
The real risk-free rate of interest, r*, is 3%, and it is expectedto remain constant over time. Inflation is expected to be 2% per year for the next 3 years and4% per year for the next 5 years. The maturity risk premium is equal to 0.1 x (t - 1)%, wheret 5 the bond’s maturity. The default risk premium for a BBB-rated bond is 1.3%.a. What is the average expected inflation rate over the next 4 years?b. What is the yield on a 4-year Treasury bond?c. What is the yield on a 4-year BBB-rated corporate bond with a liquidity premium of 0.5%?d. What is the yield on an 8-year Treasury bond?e. What is the yield on an 8-year BBB-rated corporate bond with a liquidity premium of 0.5%?f. If the yield on a 9-year Treasury bond is 7.3%, what does that imply about expectedinflation in 9 years?
A bond has a Macaulay duration of 5.5, a yield to maturity of 6.2%, a coupon rate of 6.5%, and semiannual interest payments. What is the bond's modified duration? Multiple Choice O O 4.92 years 5.46 years 4.29 years 4.39 years 5.33 years
Consider a bond that has a life of 2 years and pays a coupon of 10% per annum (with semiannual payments); the yield is 5% per annum with semiannual compounding.(a) What is the bond’s price?(b) What is the bond’s duration?(c) Suppose that the bond price is the one you computed in part (a) and that the 6M, 12M, and 18M zero rates are respectively 4.2%, 4.8% and 5.6% per annum. What is the 2Y zero rate assuming all rates are quoted with semiannual compounding?
A bond has a yield to maturity of 9.28 percent. If the inflation rate is 2.0 percent, what is the real rate of return on the bond?
What is a discount ask yield on a bond? if the bond is priced at 1,000 and 80 days to maturity and has a discount ask yield of 3.4%?

SEE MORE QUESTIONS

Recommended textbooks for you

Intermediate Financial Management (MindTap Course…

Finance

ISBN:

9781337395083

Author:

Eugene F. Brigham, Phillip R. Daves

Publisher:

Cengage Learning