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.Over the next three years, the expected path of 1-year interest rates is 4, 1, and 1 percent, and the current 1-year, 2-year, and 3-year bond interest rates are 4%, 2% and 4%, respectively. Then the 3-year term premium is _______%. Question 38 options:
- 1) Suppose that today's one-year interest rate is 5%. Consider the following one-year interest rates expected to occur over the next four years: 6%, 7%, 8% and 9%.a. Calculate the interest rate for two-year bonds, based on the expectations theory.b. What about five-year bonds?Compute the specified quantity. A 7 year bond costs $30,000 and will pay a total of $2,000 in interest over its lifetime. What is its annual interest rate r (as a percent)? (Round your answer to three decimal places.) r =• Suppose that today's one-year the following one-year interest rates expected to occur over the next four interest rate is 5%. Consider years: 6%, 7%, 8% and 9%. Calculate the interest rate for two-year bonds, based on the expectations theory. What about five-year bonds?
- What is the Macaulay duration of a $1 per year annuity-immediate payable for 10 years based on an annual interest rate of 5%? It can be calculated using the below formula, Macaulay Duration Formula t-C n-M + (1+y) (1+y) с Current Bond Price Macaulay Duration tx C + Macaulay = Duration Formula (1+ y) nxM (1+ y)n Current Bond Price 13The 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 futureOver the next three years, the expected path of 1-year interest is 4,1, and 1 percent, and the 1-year, 2-year, and 3-year term premia are 0, 1, and 2 percent, respectively. The liquidity premium theory of the term structure predicts that the current interest rate on 3-year bond is ___%.
- Over the next three years, the expected path of 1-year interest rates is 4, 1 ,and 1 percent, and the 1 year, 2 year, and 3 year term premia are 0, 1, and 2 percent, respectively. The liquidity premium theory of the term structure predicts that the current interest rate on 3 year bond is _____%The 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. _________ %1-year Treasury-bill rates are expected to steadily increase by 1.5 percentage per year over the next 6 years. Determine the required interest rate on a 3-year Treasury -bond and a 6-year Treasury-bond if the current 1-year interest rate is 7.5%. Assume that the Pure Expectations Hypothesis for interest rates holds.