QUESTION 4If the rate on a one-year Treasury security is lower than the rate on a two-year treasury security, according to the unbiased expectations theory. the expected one-year rate one yearfrom now on a Treasury security is expected to be:O the same as the current Treasury two-year rateO not enough information to determineO lower than the current Treasury one-year rateO higher than the current Treasury one-year rateO the same as the current Treasury one-year rate

Treasury securities are among the safest investments because they are backed by the full faith and…

Answered: QUESTION 4 If the rate on a one-year…

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 5 What is the maturity of a U.S. Treasury bill with a bond equivalent yield of 4.58 percent and a face value of $100000 that is priced at $99333.55. Assume It's a leap year. Your Answer:
Question 4 2) XYZ National Bank is one of the largest banks in the country. The bank has a significant amount of short-term debt with maturities less than one year. For example, at the end of 2022, the proportion of debt within 1 year is more than 50% of its assets. The bank is therefore subject to large interest rate risk. Please explain how could the interest rate swap help the bank to hedge its interest rate risk? 3) Please discuss two alternative methods that XYZ National Bank can use to manage its interest rate risk.
QUESTION 5 Suppose that the continuously compounded risk-free interest rates for 1-year, 2-year, and 3-year investments in Japan are 3.6%, 3.9%, and 4.1% per annum, respectively. Suppose further that the continuously compounded risk- free interest rates for 1-year, 2-year, and 3-year investments in the United States are 2.8%, 3.2%, and 3.5% per annum, respectively. A financial institution has entered into a currency swap in which it receives 4.5% per annum in yen and pays 3.9% per annum in dollars once a year. The principals in the two currencies are $50 million and 6.000 million yen. The swap will last for another three years, and the current exchange rate is 115 yen per dollar. What is the value of the swap (in $ millions)?
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D3 Suppose the 1-year domestic interest rate is 0.28, keeping in mind that means (100\times×0.28)%. Suppose also that the 1-year expected exchange rate is 59, and the current spot exchange rate is 50, both measured in domestic currency per foreign currency. What is the 1-year foreign interest rate according to uncovered interest parity?
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#68 The risk-free rate is 3.7%, and expected inflation is 2.4%. If inflation expectations change such that future expected inflation falls to 2.1%, what will the new risk-free rate be?
Sh4 Please help me Solution Thankyou
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QUESTION 5 Consider the effect of an un-anticipated 1 basis point increase in the 5 year bond rate (xt) at timet, which persists at t+1, t+2, ... . Assuming the 2 year bond rate (zt) does not change, and no other shocks occur at any horizon, what is the most appropriate inference regarding the change in the 10 year bond rate (yt) in the long run (i.e., infinite horizon)? O a. The 10 year bond rate increases by 1.34 in the long-run. O D. The long-run change in the 10 year bond rate is between 1.2263 and 1.4537 with 95% confidence. O C. The 10 year bond rate is not significantly affected by the increase in the 5 year bond rate. O d. The effect cannot be computed because the data is not stationary.
Q. 16 Consider a security with a duration of 7 years. The current interest rate level is 10% p.a. How does the price of the security change if interest rates increase by 1.5% (round your answer to two decimals) ? Choose the correct option The price of the security will decrease by 1.5%. The price of the security will increase by 1.5%. The price of the security will decrease by 8.5%. The price of the security will increase by 9.55%. The price of the security will decrease by 9.55%.
34.The real risk-free rate of interest is 3%, and it is expected to be constant over time. Expected inflation is expected to be 3% in Year 1, 4% in Year 2, and 5% in Year 3. Maturity risk premium is 0. What is the interest rate on Treasury securities with three year maturity? (Format: X.XX%)

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