Question 1 (1 point) Suppose the interest rate on 5-year TIPS is 2% while the interest rate on standard 5-year nominal bonds is 6%. The interest rate on 10-year TIPS is 2% while the interest rate on 10-year nominal bonds is X%. Bond investors expect a 3% average inflation between 2029 and 2034. What is X? [answer with one decimal, without the % sign, for instance 1.2]

Question 2 (at home, to practice) Suppose the interest rate on a bond offered to investors by National Savings and Investments (a UK government bank) is 4% per year + inflation and the expected inflation rate in the UK for next year is 2.7%. A. What is the exact expected nominal interest rate for this bond next year? B. Using this numerical example, explain in your own words the difference between nominal interest rates and real interest rates. C. Assume this bond matures in five years and assume that the annual inflation rate is constant for the next five years. What would be the final payment at maturity for an investment of £120? 1

ook int ences Problem 2-11 (LG 2-7) Suppose we observe the three-year Treasury security rate (13) to be 4.9 percent, the expected one-year rate next year-E(21)-to be 5.4 percent, and the expected one-year rate the following year-E(31)-to be 6.4 percent. If the unbiased expectations theory of the term structure of interest rates holds, what is the one-year Treasury security rate? (Do not round intermediate calculations. Round your percentage answer to 2 decimal places. (e.g., 32.16)) _________% One-year Treasury security rate

ANSWER ASAP PLZ   You observe a one-year discount US Treasury bond in the market with the following characteristics: Face Value of $100 and Price of $91.   1) What is the implied one-year interest rate?   2) You also observe a 2-year US Treasury bond selling at par with the following characteristics: Face value of $1,000 and annual coupon of 10%. What is the implied one-year Treasury rate for the second year?

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5-4: Suppose today is January 2, 2022, and investors expect the annual nominal risk-free interest rates in 2026 and 2027 to be: Year 2026 2027 One-Year Rate (IRE) 4.5% 2.3% Currently a four-year Treasury bond that matures on December 13, 2025 has an interest rate that equal to 2.5 percent. What is the yield on Treasury bonds that mature at the end of (a) 2026 (a five- year bond) and (b) 2027 (a six-year bond)? Assume the bonds have no risk. (LO 5-3)

Question 4 The following is a list of prices today for bonds with different maturities. Face value is 100. Assume that the bonds pay their coupons annually, and that the YTMs in the table are annualized and compounded annually. Both coupon rate and yield to maturity (YTM) is in percent. Maturity (years) Price Coupon rate YTM 1 98.00 0 ?2 100 ? 5.00 3?9 6.00 Fill in the missing values in the table.What are the annualized spot rates for years 1 & 2 (r1 & r2)? Given r1 & r2, what is the price of a 2-year coupon bond with annual coupon rate of 7%? What is the duration of this bond?

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H5. Show proper step by step calculation

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