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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- 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 E(2r1) E(3r1) E(4r1) 1.20% 2.35% L2 = 0.09% 2.45% L3 = 0.12% 2.75% L4= 0.14% Using the liquidity premium theory, determine the current (long-term) rates. (Do not round intermediate calculations. Round your answers to 2 decimal places.)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 0.85% R₁ = E(2r1) = 2.00% E(3r1) = 2.10% E(41) = 2.40% 42 = 43 = 0.08% 0.10% L4 44 = 0.12% Using the liquidity premium theory, determine the current (long-term) rates. Note: Do not round intermediate calculations. Round your percentage answers to 2 decimal places (i.e., 0.1234 should be entered as 12.34). 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 entered
- Give typing answer with explanation and conclusion to all parts The real risk-free rate, r*, is 2%, and inflation is expected to be 3.0% this year, 3.5% for the next two years; 4.0% the following year, and then 5.0% thereafter. The maturity risk premium is estimated to be 0.05%(t1), where t = number of years to maturity. Liquidity risk premium is 0.7%, default risk premium is 1%. - What are the Treasury yield for 3 years, and 6 years bonds? - What are the Corporate yield for 3 years, and 6 years bonds?Please solve it in excel with Formulas explanationAssume 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%
- 4 - Based on economistsAc€?c forecasts and analysis, 1-year Treasury bill rates and liquidity premiums for the next four years are expected to be as follows: R1 = .90% E(2r1) = 2.05% L2 = 0.09% E(3r1) = 2.15% L3 = 0.12% E(4r1) = 2.45% L4 = 0.14% Using the liquidity premium theory, plot the current yield curve. Make sure you label the axes on the graph and identify the four annual rates on the curve both on the axes and on the yield curve itself. (Do not round intermediate calculations. Round your answers to 2 decimal places.) Year Current (Long-term) Rates 1 % 2 % 3 % 4 % 6 - On March 11, 20XX, the existing or current (spot) 1-, 2-, 3-, and 4-year zero coupon Treasury security rates were as follows: 1R1 = 0.90%, 1R2 = 1.50%, 1R3 = 1.90%, 1R4 = 2.05% Using the unbiased…5 Year Treasury Notes are currently yielding 5.50%, and you have found the following interest premium that relate to this investment. Inflation premium 3.00% Liquidity premium 0.00% Default risk premium 0.00% Maturity risk premium 1.25% Given the above information, what is the real risk rate of return?PLEASE ANSWER IN EXCEL FORMAT - A= ( B+ * )
- Bhupatbhai5 Year Treasury Notes are currently yielding 6.00%, and you have found the following interest premium that relate to this investment: • Inflation premium 1.75% • Liquidity premium 0.00% • Default risk premium 0.00% • Maturity risk premium 1.50% Given the above information, what is the real risk-free rate of return?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 (?)