Consider a US Treasury bill with one-year maturity and face value of $1,000 that sells for $900 today. Using this information, determine the yield to maturity for this discount bond. Yield to maturity (in percent, two decimal places) = Recall, interest rates on discount bonds are often quoted in terms of yield on a discount basis. For the sake of comparison, also determine the yield on a discount basis for this bond. Yield on a discount basis (in percent, two decimal places) =

Consider a US Treasury bill with one-year maturity and face value of $1,000 that sells for $900 today. Using this information, determine the yield to maturity for this discount bond. Yield to maturity (in percent, two decimal places) = Recall, interest rates on discount bonds are often quoted in terms of yield on a discount basis. For the sake of comparison, also determine the yield on a discount basis for this bond. Yield on a discount basis (in percent, two decimal places) =

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

See similar textbooks

Similar questions

Consider a U.S. Treasury Bill with 270 days to maturity. The face value is $100. If the annual yield is 4.7 percent, what is the price? (Note: Treat 270 days as 9 months, or 9/12 of a year using a 360-day year.)
The table below shows current and expected future one-year interest rates, as well as current interest rates on multiyear bonds. Use the table to calculate the liquidity premium for each multiyear bond. One-Year Bond Rate 2.00% 5.00% 8.00% 11.00% 13.00% The liquidity premiums for each year are given as: (Enter your responses rounded to two decimal places.) 131 = = 151 = % % % % Year 1 2345 2 Multiyear Bond Rate 2.00% 5.00% 6.00% 8.00% 10.00%
A large money center bank uses the US treasury yield curve to determine the appropriate level for its lending rates. To compensate for the costs of making a loan, the bank needs to charge 1.8% point more than the expected future interest rate on a Treasury security with the same maturity if it is to make a profit. The manager is considering a loan request from a customer seeking a one year loan that starts 2 years from today. If the two-year Treasury Strip rate is 4.1% and the three-year Treasury strip rate is 5.5%, at what minimum rate should the manager be willing to make the loan commitment?Enter your answer as a % to two decimal places. Assume the expectation theory of rates is valid and all liquidity premiums are zero.
If the interest rate is 10%, what is the present value of a security that pays you $1,150 next year, $1,230 the year after, and $1,344 the year after that? ← Present value is $ (Round your response to the nearest penny.)
3. ABC Corporation issued today a bond in favor of Mr. Barboncito and the bond has a face value of P1,000,000.00. Barboncito expects to earn at a bond rate of 7% and such bond matures six (6) years from today. If interest, i, equals 12% compounded yearly, a. What is the present value of the bond? b. The President of the corporation is bent on paying the yearly obligations to Barboncito, in addition to the yearly fund that the corporation has to set aside in anticipation of the maturity of the bond. How much then is the total yearly amount that the corporation has to prepare to meet its obligations?
The market consensus is that U.S. inflation will remain low, averaging 1% over the next 3 years. However you perceive that inflation may be higher than market estimates, averaging 2% per year. How would this affect the price you would be willing to pay for the bond?
Indicate which one of following statements is true for a coupon bond: A) When the price of a bond is above its par value, the yield to maturity is greater than the coupon rate. B) The yield to maturity and the price of a coupon bond are positively related. C) When the price of a coupon bond equals its face value, the yield to maturity equals the coupon rate. D) When the price of a bond is below its par value, the yield to maturity is less than the coupon rate Support your answer with the use of a formula and explain in detail all the assumptions you make and all the components you use. (You may also want to use a yield calculator to verify you answer).
Find the spot rate for a theoretical 2 year zero coupon bond using the following information: 6 month T-bill rate = .5% 1 year T-Bill rate = .75% 1.5-year T-Note rate = 1.10% 2-year T-Note rate = 1.65%
Question 6 Suppose you are interested in buying a one-year 1,000 dirham bond. You have two options available in the bond market: Option 1 - Emirates Airline bond that pays a coupon rate of 4.75% per year paid annually. Option 2 - Emaar bond that pays a coupon rate of 6.0% per year paid annually. If you decide to buy the Emirates Airline bond, which of the prices below will give you a return approximately equal to the Emaar bond? O a. 956.9 dirhams Ob.973.2 dirhams O. 995.2 dirhams Od. 988.2 dirhams
Currently a three-month Treasury bill has a yield of 5% while the yield on a ten-year Treasury bond is 4.7%. What is the risk premium of an A-rated ten-year corporate bond with a yield of 5.5%? 0.5% 5.5% 0.8% 1.17%
Inflationary expectations in the economy increase rapidly, evoking a much stronger response from issuers of bonds than lenders of bonds. Using the model of supply and demand for bonds, illustrate and explain the impact of this increase in inflationary expectation on equilibrium bond price and interest rate.
Consider a $1200 bond that makes $30 annual coupon payments. If the interest rate is 2 percent and the bond matures in two years, what is the bond's present value? Carefully follow all mathematical instructions. Round intermediate steps to four decimal places and your final answer to two decimal places.