QUESTION 12 Today, markef interest rates on US Treasury securities are 3 8% on one yoar (maturity) Treasury bill and 5 6% on two yo (maury Troasury note If investors expect an interest rate on one yoar Treasury bill to become 42% one yoar later, then acconding to the liquidity premium theory, a liquidity premium on the two-yoar Treasury note should be place without % sign eg 12.3) %today (Answ up to the fest decimal

QUESTION 12 Today, markef interest rates on US Treasury securities are 3 8% on one yoar (maturity) Treasury bill and 5 6% on two yo (maury Troasury note If investors expect an interest rate on one yoar Treasury bill to become 42% one yoar later, then acconding to the liquidity premium theory, a liquidity premium on the two-yoar Treasury note should be place without % sign eg 12.3) %today (Answ up to the fest decimal

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Question 7 tab The Federal Funds Rate is O the rate charged on U.S. Treasury bonds by the Federal Reserve O the rate charged on corporate bank loans to healthy "prime" borrowers the rate charged on overnight loans between banks the rate charged on U.S securities with maturities of less than a year Onone of the above esc ctrl shift T caps lock A Moving to another question will save this response. Type here to search f1 00? It →1 1 fn f2 * 2 A f3 N # 3 W E f4 S x alt LA 4 D f5 AD % R C 5 f6 10 T V 6 S hp f7 & B
The figure is listed in the first picture on the right we have the start of the list and on the left it is the figure continued second picture is the question to answer. Thank you
Problem 6-30 Coupon Rates [LO 2] You find the following Treasury bond quotes. To calculate the number of years until maturity, assume that it is currently May 2022. All of the bonds have a par value of $1,000 and pay semiannual coupons. Rate ?? 5.901 6.128 Maturity Month/Year May 29 May 34 May 44 Coupon rate Bid Asked 103.6249 103.5371 104.4861 104.6318 ?? ?? In the above table, find the Treasury bond that matures in May 2029. What is the coupon rate for this bond? Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16. Change Ask Yield +.3209 2.189 ?? +.4209 +.5314 3.891 %
Problem 6-10 Liquidity Premium Theory (LG6-7) One-year Treasury bills currently earn 3.10 percent. You expect that one year from now, 1-year Treasury bill rates will increase to 3.30 percent and that two years from now, 1-year Treasury bill rates will increase to 3.80 percent. The liquidity premium on 2-year securities is 0.15 percent and on 3-year securities is 0.25 percent. If the liquidity premium theory is correct, what should the current rate be on 3-year Treasury securities? (Do not round intermediate calculations. Round your answer to 2 decimal places.)
Question 5 1 pts The real risk-free rate is 2.5 percent. Inflation is expected to be 2.5 percent this year, 4 percent next year, and 5 percent thereafter. The maturity risk premium is estimated to be 0.09x (t-1)%, where t is the number of years to maturity. What is the yield on a 7-year Treasury note? 8.04% O 7.00% 0.63% O 5.54% O 7.54%
Question 9 Mr. Dover is purchasing a government strip bond with a face value of $5,000 and 30 years until maturity If the price of the bond is $924.06, what is its nominal yield? Note: Please make sure your answer are in porcentage form and are Accurate to 3 decimal places.
Problem 6-23 Real Returns (LO3) Suppose that you buy a TIPS (inflation-indexed) bond with a 2-year maturity and a (real) coupon of 4.4% paid annually. If you buy the bond at its face value of $1,000, and the inflation rate is 8.60% in each year. a. What will be your cash flow in year 1? Note: Do not round intermediate calculations. Round your answer to 2 decimal places. Cash flow b. What will be your cash flow in year 2? Note: Do not round intermediate calculations. Round your answer to 2 decimal places. Cash flow c. What will be your real rate of return over the two-year period? Note: Enter your answer as a percent rounded to 1 decimal place.
savita
Question 4 (i) What is the approximate annualized yield on a 6-month Treasury bill with a face value of $1000 that is sold at $970 in the primary market? (ii) A 5-year Treasury bond (TBOND1) is sold on the market one day at $1000 with an annual coupon of $60. The following day bad news hits the market and a new 5-year Treasury bond is sold on the market at an $80 annual coupon. What is the approximate new secondary market price of TBOND1? (iii) Write down an equation for the three main components of the nominal long term interest rate on a bond, clearly explaining what each symbol stands for.
Question 5 0/1 Oscorp has just issued its Norman Special Long Bond. The bonds have a maturity of 25 years, a coupon rate of 0.50% and pay the coupon on a semi-annual basis. The face value of the bond is $1000. The bonds are trading at a YTM of 5.00%. What is the current yield of these? (Enter your answer as a % accurate to two decimal points. DO NOT add a % symbol or any extraneous punctuation.)
9
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