Question 2: You are considering applying for a home loan from Allied Bank Limited for the amount of Rs.35,000.000 for five years. You had a formal meeting with the credit officer and he agreed to approve your loan at 17.82% per annum. Upon your request, he explained to you the components of your rate but did notsharewith you the maturity risk premium. It creates suspense for you and you discussed the case with your friend working in Bank Al Habib and asked him to calculate the MRP for you. You have the following information Duration 1-Year Real 3-Year 5-Year 1.25% 1.35% 1.67% 2.75% returns 2.56% Default Risk 2.07% Premium Liquidity 2.04% Risk 2.09% 2.12% Premium Pakistan statistical bureau published the expected inflation in Pakistan and you got the following table from the website Year Expected 6.74% Inflation 2025 6.46% 2021 2022 2023 10.74% 8.66% 2024 7.27% 2026 6.46% 2027 5.32% 2028 5.32%
Question 2: You are considering applying for a home loan from Allied Bank Limited for the amount of Rs.35,000.000 for five years. You had a formal meeting with the credit officer and he agreed to approve your loan at 17.82% per annum. Upon your request, he explained to you the components of your rate but did notsharewith you the maturity risk premium. It creates suspense for you and you discussed the case with your friend working in Bank Al Habib and asked him to calculate the MRP for you. You have the following information Duration 1-Year Real 3-Year 5-Year 1.25% 1.35% 1.67% 2.75% returns 2.56% Default Risk 2.07% Premium Liquidity 2.04% Risk 2.09% 2.12% Premium Pakistan statistical bureau published the expected inflation in Pakistan and you got the following table from the website Year Expected 6.74% Inflation 2025 6.46% 2021 2022 2023 10.74% 8.66% 2024 7.27% 2026 6.46% 2027 5.32% 2028 5.32%
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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Transcribed Image Text:Question 2: You are considering applying for a home loan from Allied Bank Limited
for the amount of Rs.35,000.000 for five years. You had a formal meeting with the
credit officer and he agreed to approve your loan at 17.82% per annum. Upon your
request, he explained to you the components of your rate but did notsharewith you
the maturity risk premium. It creates suspense for you and you discussed the case
with your friend working in Bank Al Habib and asked him to calculate the MRP for you.
You have the following information
Duration
Real
1-Year
3-Year
5-Year
1.25%
2.07%
1.35%
1.67%
returns
Default
Risk
Premium
2.56%
2.75%
Liquidity
Risk
2.04%
2.09%
2.12%
Premium
Pakistan statistical bureau published the expected inflation in Pakistan and you got
the following table from the website
Year
Expected 6.74%
Inflation
2021
2022
2023
2024
2025
2026
2027
5.32%
2028
10.74% 8.66%
7.27%
6.46%
6.46%
5.32%
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