If the interest rate is 4 percent, what is the present value of a security that pays you $100 two years from now and $110 five years from now? If this security sold for $190, is the yield to maturity greater or less than 4 percent? Explain why (No calculation needed)
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A: Given: Real risk free rate = 2.5% Inflation rate = 2.75% Return on assets = 5.95% Maturity risk…
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A: Given: Future value (FV) = 7000 Number of years (n) = 20 Interest rate (r) = 7% = 0.07
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Q: Consider a bond with face value of $1000, a coupon rate of 8% (paid annually), and ten years to…
A:
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A: Price of bond is Present value of coupon and present value of par value of bond.
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A: Here, Face value (FV) = $100 Coupon rate = 4.5% semiannually Coupon payments (PMT) = (4.5% of 100)/2…
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A: Yield on maturity is the return anticipated on a bond at the end of the maturity period of the bond.…
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A: Introduction : Current yield ( current rate of return)= 5.75% Inflation premium 2.50% Liquidity…
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A: Coupon Rate (C)= 10% or 0.1 Time Period (n)= 10 Years Yield to Maturity(Y) = 12% or 0.12 No. of…
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A: Note: This post has multiple questions. The first three questions have been answered below.
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Q: (b)You purchase the $110 bond today and sell it off next year at $108. What is its one-year rate of…
A: Given Information : Purchase price of bond = $110 Selling price of bond = $108 Face value of bond =…
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A: maturity risk premium = Tt = r + ipt + mrpt where r = risk…
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A: Nominal interest rate is the rate of interest before adjustment of inflation.
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A: Present value refers to the value of money today. Sometimes, present value is also known as…
Q: The real risk-free rate is 2.5% and inflation is expected to be 2.75% for the next 2 years. A 2-year…
A: “Hey, since there are two different questions are posted, we will answer first question. If you want…
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A: Given: 10 year Treasury bond yield =5.05% 10 year Treasury inflation = 1.80% MRP on T bond = 0.90%
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A: Future value is total of initial investment plus compound interest on that. Compound interest could…
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A: We know that the treasury security yield is determined by the addition of risk-free rate, inflation…
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A: given, rf=3.25%inf2= 3.75%T security yield = 9.25%
Q: Suppose that for a price of $960 you purchase a 7-year Treasury bond that has a face value of $1,000…
A: Rate of Return = Coupon + Capital AppreciationTotal Investmentx100
Q: present value of a security
A: The present value is the computations used under the concept of the time value of money, where the…
Q: What is the present value of a security that will pay $10,000 in 20 years if securities of equal…
A: The formula used as follows: Present value=Future value1+rt
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A: Maturity Risk relates to risk directly related to term of investments. Maturity Risk Premium(MRP) is…
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A: Here, The interest rate or yield curve is 'r' Duration of payment is 't'
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A: Present value (PV) is the current value of a future sum of money or stream of cash flows given a…
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A: Present value is the value of the money in current time that is expected to be received in future…
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A: Here, As the Face Value of the Bond is not given in the question, we are assuming it to be $1,000.…
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A: Market Price is 94 TL Days to MAturity = 75 Face value = 100 TL Yield on Bond = 100 TL-94TL…
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A: FV = $1,000 Coupon Rate = 9% N = 10-1 = 9 YTM = 9% Using Financial Calculator : PV = $1,000.
Q: What should the current market price be for a bond with a $1,000 face value, a 10% coupon rate paid…
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A: Annual effective interest rate is interest rate considering after the effect of compounding.
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A: Given: Face value is $10,000 Years = 10 Interest rate = 4.5%
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- Consider two 1-year loans with a principal of $1 million and a default probability of 2% each. Assume that if one loan defaults, the other does not. Assume that in the event of default, the loan leads to a loss that can take any value between $0 and $1 million with equal probability, i.e., the probability that the loss is higher than $ ? million is 1 − ?. If a loan does not default, it yields a profit equal to $0.02 million. a) Compute the 1-year 99% Value at Risk (VaR) and Expected Shortfall (ES) of a single loan.Consider two 1-year loans with a principal of $1 million and a default probability of 2% each. Assume that if one loan defaults, the other does not. Assume that in the event of default, the loan leads to a loss that can take any value between $0 and $1 million with equal probability, i.e., the probability that the loss is higher than $x million is 1-x. If a loan does not default, it yields a profit equal to $0.02 million. a) Compute the 1-year 99% Value at Risk (VaR) and Expected Shortfall (ES) of a single loan. b) Compute the 1-year 99% VaR and ES for the portfolio of both loans. c) Does the VaR and the ES satisfy the subadditivity property in this case?What is the yield to maturity on a simple loan for $1 million that requires a repayment of $2 million in five years’ time?
- 10. Antonio asks for a one-year loan at a bank when the one-year Treasury rate is 2%. a. If the loan is an unsecured vacation loan carrying an interest rate of 4.21%, what probability of default does the bank use when pricing Antonio's loan? b. If the loan were secured and carried an interest rate of 2.91% and had the same probability of default as in part a, what is the expected recovery rate on the loan?Assume you have the following asset and liability in your Balance Sheet: Asset - Bond A Modified Duration = 2.6 years Value = RM1.5 million Liability - Bond B Modified Duration = 3.1 years Value = RM1.0 million a. Calculate the duration gap. b. What is the expected change in Net Worth if interest increases by 1%? c. What should or could you to achieve immunised balance sheet? Note: Please show all workings.The formula below tells us how to obtain the maturity value on a simple discount loan if we are given the proceeds, the discount rate, and the term. M = T-dRT If a loan's annual simple discount rate is 3.34%, how many years would it take for the debt to double? (This is called the doublin time of a loan). Round your answer to the nearest tenth of a year. Hint: divide both sides of the equation by P. If M is twice as much as P, what should the fraction on the left-hand side equal?
- 1. What is the different between an ordinary annuity and an annuity due? Which occursmore in practice? Give a common example of both. 2. Using the example of a savings account, explain the difference between the effectiveannual rate and the annual percentage rate. 3. A mortgage instrument pays $1.5 million at the end of each of the next two years. Aninvestor has an alternative investment with the same amount of risk that will payinterest at 8% compounded semiannually. what the investor should pay for themortgage instrument?Explain the nature of the potential lending losses associated with each of the following: default risk, liquidity risk, and maturity risk. What would you pay for an annuity paying $3,000 per year for 12 years if the interest rate is 10%?Suppose the risk-free interest rate is 4.6%. Having $600 today is equivalent to having what amount in one year? (Round to the nearestcent.) Having $600 in one year is equivalent to having what amount today? (Round to the nearestcent.) Which would you prefer, $600 today or $600 in one year? Does your answer depend on when you need the money? Why or why not? (Round to the nearestcent.)
- If the interest rate is 15%, what is the present value of a security that pays you $1,100 next year, $1,250 the year after, and $1,343 the year after that? Present value is $ (Round your response to the nearest penny.)5. Finding the interest rate and the number of years The future value and present value equations also help in finding the interest rate and the number of years that correspond to present and future value calculations. If a security currently worth $12,800 will be worth $16,843.93 seven years in the future, what is the implied interest rate the investor will earn on the security—assuming that no additional deposits or withdrawals are made? 7.60% 0.19% 4.00% 1.32% If an investment of $40,000 is earning an interest rate of 4.00%, compounded annually, then it will take for this investment to reach a value of $53,679.69—assuming that no additional deposits or withdrawals are made during this time. Which of the following statements is true—assuming that no additional deposits or withdrawals are made? It takes 14.21 years for $500 to double if invested at an annual rate of 5%. It takes 10.50 years for $500 to double if invested…The formula below tells us how to obtain the maturity value on a simple discount loan if we are given the proceeds, the discount rate, and the term. If a loan's annual simple discount rate is 7.56%, how many years would it take for the debt to double? (This is called the doubling time of a loan). Round your answer to the nearest tenth of a year. Hint: divide both sides of the equation by P. If M is twice as much as P, what should the fraction on the left-hand side equal?