Consider the effect of an un-anticipated 1 basis point increase in the 5 year bond rate (x+) at time t, which persists at t+1, t+2, .... Assuming the 2 year bond rate (z+) does not change, and no other shocks occur at any horizon, what is the most appropriate inference regarding the change in the 10 year bond rate (yt) in the long run (i.e., infinite horizon)? Ⓒa. The 10 year bond rate increases by 1.34 in the long-run. O b. The long-run change in the 10 year bond rate is between 1.2263 and 1.4537 with 95% confidence. O c. The 10 year bond rate is not significantly affected by the increase in the 5 year bond rate. Od. The effect cannot be computed because the data is not stationary.
Consider the effect of an un-anticipated 1 basis point increase in the 5 year bond rate (x+) at time t, which persists at t+1, t+2, .... Assuming the 2 year bond rate (z+) does not change, and no other shocks occur at any horizon, what is the most appropriate inference regarding the change in the 10 year bond rate (yt) in the long run (i.e., infinite horizon)? Ⓒa. The 10 year bond rate increases by 1.34 in the long-run. O b. The long-run change in the 10 year bond rate is between 1.2263 and 1.4537 with 95% confidence. O c. The 10 year bond rate is not significantly affected by the increase in the 5 year bond rate. Od. The effect cannot be computed because the data is not stationary.
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 3Q: The rate of return on a bond held to its maturity date is called the bonds yield to maturity. If...
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![Consider the effect of an un-anticipated 1 basis point increase in the 5 year bond rate (xt) at time t, which persists
at t+1, t+2, .
Assuming the 2 year bond rate (zt) does not change, and no other shocks occur at any horizon, what is
...
the most appropriate inference regarding the change in the 10 year bond rate (yt) in the long run (i.e., infinite horizon)?
O a. The 10 year bond rate increases by 1.34 in the long-run.
Ob.
· The long-run change in the 10 year bond rate is between 1.2263 and 1.4537 with 95% confidence.
C. The 10 year bond rate is not significantly affected by the increase in the 5 year bond rate.
d.
The effect cannot be computed because the data is not stationary.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F5aedc046-6009-40f4-a241-fae75bf0f05e%2Fef1360a1-e498-4167-b838-15dc32679a49%2Fxykaiyb_processed.png&w=3840&q=75)
Transcribed Image Text:Consider the effect of an un-anticipated 1 basis point increase in the 5 year bond rate (xt) at time t, which persists
at t+1, t+2, .
Assuming the 2 year bond rate (zt) does not change, and no other shocks occur at any horizon, what is
...
the most appropriate inference regarding the change in the 10 year bond rate (yt) in the long run (i.e., infinite horizon)?
O a. The 10 year bond rate increases by 1.34 in the long-run.
Ob.
· The long-run change in the 10 year bond rate is between 1.2263 and 1.4537 with 95% confidence.
C. The 10 year bond rate is not significantly affected by the increase in the 5 year bond rate.
d.
The effect cannot be computed because the data is not stationary.
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