If 1-year interest rates for the next three years are expected to be 4, 2, and 3 percent, and the 3-year term premium is 1 percent, then the 3-year bond rate will be: A) 1 percent B) 2 percent C) 3 percent D) 4 percent
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- Need helpIf 1-year interest rates for the next eight years are expected to be 4, 2, 3, 4, 5, 6, 5 and 3 percent, and the 8-year term premium is 2 percent, what is the 8-year bond rate? Show your work.What is the present value of a 10-year bond outstanding with 8 years left in “year-to-maturity,” 6% annual required rate, and 4% annual payment rate?
- According to the expectations theory of the term structure of interest, if the 1-year bond rate today is 6% p.a. and the 2-year bond rate today is 7% p.a., what is the 1-year bond rate next year? A. 6% B. 6.75% C. 7.5% D. 8%The three-year interest rate is 7.40% and the four-year interest rate is 8.6%. The liquidity premium for three-year and four-year bonds are 0.40 and 0.60 respectively. Calculate the adjusted forward rate forecast for three-year periods in the futureThe interest rate on one-year Treasury bonds is 1.1 percent, the rate on two-year T-bonds is 1.3 percent, and the rate on three-year T-bonds is 1.5 percent. Using the expectations theory, compute the expected one-year interest rate in the second year (Year 2 only). Round your answer to one decimal place. _________ % Using the expectations theory, compute the expected one-year interest rate in the third year (Year 3 only). Round your answer to one decimal place. _________ %
- Bond A has the following terms: (Use semi- annual interest payments if applicable.) Coupon rate of interest: 10 percent Principle: $1,000 Term to maturity: 8 years Bond B has the following terms: (Use semi- annual interest payments if applicable.) Coupon rate of interest: 5 percent Principle: $1,000 Term to maturity: 8 years What should be the price of each bond if interest rates are 10 percent? What will be the price of each bond if, after five years have elapsed, interest rates are 10 percent? What will be the price of each bond if, after eight years have elapsed, interest rates are 8 percent?You purchased a bond and will receive $500every six months for the next five years. If the market rateof interest is 4%, what is the present value of your stream ofinterest payments? (a stream of equal interest payments isconsidered an annuity).According to the expectations theory of the term structure of interest, if the 1-year bond rate today is 6.50% p.a., the 2-year bond rate today is 6.70% p.a., and the 3-year bond rate today is 7.00%, what will be the 2-year bond rate next year?
- Suppose the current YTM on a 5-year T-Bond is 2.8% and the current YTM for a 1-year T-Bond is 0.75%. What is the 5-year term premium if the expected 1-year rates for thenext 4 years are 1.25%, 1.75%, 2.5%, and 3.25%?A ten-year bond, with par value equals $1000, pays 10% annually. If similar bonds are currently yielding 6% annually, what is the market value of the bond? Use semi-annual analysisCalculate the value of a 2-year 3.5% annual pay bond given the interest rate below. What is the implied 3-year spot rate? Time Period Forward Rate z1 0.80% 1f1 1.12% 1f2 3.94% 1f3 3.28% 1f4 3.14%