Liquidity Premium Hypothesis Based on economists' forecasts and analysis, one-year Treasury bill rates and liquidity premiums for the next four years are expected to be as follows: R₁ = 7.25% = E(2) 8.35% L₂ = .70% E(3) 8.45% L3 = .80% = E(r) = 8.75% L4 = .85% Using the liquidity premium hypothesis, what is the current rate on a four-year Treasury security?
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- ok t Based on economists' forecasts and analysis, 1-year Treasury bill rates and liquidity premiums for the next four years are expected to be as follows: R1 = 0.65% E(201) = 1.80 % L2 = 0.04% E(301) = 1.98% L3 = 0.08% E(471) = 2.20% L4 = 0.10% Using the liquidity premium theory, determine the current (long-term) rates. (Do not round intermediate calculations. Round your answers to 2 decimal places.) Years 1 2 3 4 Current (Long- Term) Rates % % % %ok Based on economists' forecasts and analysis, 1-year Treasury bill rates and liquidity premiums for the next four years are expected to be as follows: R1 = 1.00% = 2.15% 2.25% = 2.55% E(21) E(31) = E(471) 42 = L3 = L4 = Using the liquidity premium theory, determine the current (long-term) rates. 0.05% 0.10% 0.12% nel plecor (in 01234 should be enteredPlease solve it in excel with Formulas explanation
- Assume that you are given the following historical returns for the Market and Security J. Also assume that the expected risk-free rate for the coming year is 4.0 percent, while the expected market risk premium is 15.0 percent. Given this information, determine the required rate of return for Security J for the coming year, using CAPM. Year 1 2 O21.20% 3 4 5 6 O22.34% O 23.49% O24.63% O24.10% Market 10.00% 12.00% 16.00% 14.00% 12.00% 10.00% Security J 12.00% 14.00% 18.00% 22.00% 18.00% 14.00%es Based on economists' forecasts and analysis, one-year T-bill rates and liquidity premiums for the next four years are expected to be as follows: 1R1 E(271) = .84% E(371) = .94% E(471) = 1.24% = .47% Year 1 Year 2 Year 3 Year 4 42 = 0.07% 43 L4 = 0.17% = 0.14% Identify the four annual rates. (Round your answers to 2 decimal places. (e.g., 32.16)) Annual Rates oto oto oto oto % % % %PLEASE ANSWER IN EXCEL FORMAT - A= ( B+ * )
- 11. Changesto the security market line The following graph plots the current security market line (SML) and indicates the return that investors require from holding stock from Happy Corp. (HC). Based on the graph, complete the table that follows. (Tool tip: Mouse over the points in the graph to see their coordinates.) REQUIRED RATE OF RETURN (Percent) 20.0 16.0 12.0 8.0 4.0 O Do 0.5 ■ 1.0 RISK (Beta) 1.5 2.0 (?)Please provide written/detailed calculations and relavant explanationQuantitative Problem: An analyst evaluating securities has obtained the following information. The real rate of interest is 2.5% and is expected to remain constant for the next 5 years. Inflation is expected to be 2% next year, 3% the following year, 4% the third year, and 5% every year thereafter. The maturity risk premium is estimated to be 0.1 x (t- 1)%, where t = number of years to maturity. The liquidity premium on relevant 5-year securities is 0.5% and the default risk premium on relevant 5-year securities is 1%. a. What is the yield on a 1-year T-bill? Do not round intermediate calculations. Round your answer to two decimal places. % b. What is the yield on a 5-year T-bond? Do not round intermediate calculations. Round your answer to two decimal places. % c. What is the yield on a 5-year corporate bond? Do not round intermediate calculations. Round your answer to two decimal places. % Icon Key Check My Work (3 remaining)
- The pure rate of return is 1.5%. Inflation is expected to be 2% this year and 3% during the next two years. Assume that the maturity risk premium for 2 and 3 years security are 1.2% and 1.3% respectively. What is the yield on 2 year Treasury Securities? Group of answer choices 5.47% 5.20% 5.37% 5.30% Please show the steps.Suppose we observe the following rates: 1R₁ = 6.2%, 1R₂ = 7.1%, and E(21) = 6.2%. If the liquidity premium theory of the term structure of interest rates holds, what is the liquidity premium for year 2? (Round your intermediate calculations to 5 decimal places and final percentage answer to 2 decimal places. (e.g., 32.16)) Liquidity premium for year 2 %Solve these 2 practice problems