Suppose that discount bond prices are as follows: 2 4. P 0.9525 0.899 0.838 0.760 0.05 0.065 0.054 0.070 A customer would like to have a forward contract to borrow $20M two years from now for one vear. Can you (a bank) quote a rate for this forwardloan? Question 15 Your investment account earned 10.8% last year, inflation was 6.0% for last year. What was the real return on your account last year?

Suppose that discount bond prices are as follows: 2 4. P 0.9525 0.899 0.838 0.760 0.05 0.065 0.054 0.070 A customer would like to have a forward contract to borrow $20M two years from now for one vear. Can you (a bank) quote a rate for this forwardloan? Question 15 Your investment account earned 10.8% last year, inflation was 6.0% for last year. What was the real return on your account last 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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Similar questions

suppose the interest rate on a 3 year treasury note is 1.00% and 5 year notes are yielding 3.50% Based on the expectatiions theory, what does the market believe that 2 year treasuries will be yielding 3 years from now?
If the loan interest rate adjusts every quarter and the deposit interest rate adjust every six months, the risk of interest rate from the different frequencies of rate adjustments is called Repricing risk O yield -curve risk basis point risk O default risk QUESTION 5 If the loan interest rate is 4 % mark-up on the 6 month treasury bill and the deposit interest rate is 1% mark-up on the 3 month treasury bill, the risk of interest rate like this is called
15
Suppose our corporation can borrow in EUR at 0.06% for 1 year. The current exchange rate is USD1.10/EUR, and the EUR is expected to appreciate against the dollar to USD1.2/EUR. What is the interest rate cost of the bond in USD? Please enter your answer as % -- e.g. if your answer is 2.34% type in 2.34.
Suppose two firms want to borrow money from a bank for a period of one year. Firm A has excellent credit, whereas Firm B’s credit standing is such that it would pay prime + 3 percent. The current prime rate is 6.55 percent, the 30-year Treasury bond yield is 4.30 percent, the three-month Treasury bill yield is 3.47 percent, and the 10-year Treasury note yield is 4.23 percent. Now suppose that Firm B decides to get a term loan for 10 years. What is the loan rate for the firm? Firm B's loan rate % How does this affect the company’s borrowing cost? Company's borrowing cost will (increase/ remain the same / decrease) .
A4 3 You bought one of BB Co.’s 10% coupon bonds one year ago for $1100. These bonds make annual payments, have a face value of $1000 each, and mature seven years from now. Suppose you decide to sell your bonds today, when the required return on the bonds is 8%. If the inflation rate was 3% over the past year, what would be your total real return on investment according to the Exact Fisher Formula?
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
28. An investor buys a T-bill at a bank discount quote of 4.60 with 160 days to maturity. The investor's actual annual rate of return on this investment was 4.76% 4.89% 4.66% 5.00%
don't use excel also can you show me maths solving with equation by hand please....
1 Roy's Welding's bond has an annual rate of return of 5.97 percent and a face value of $1,000. The current rate of inflation is 3.02 percent. What is the real rate of return on these bonds?
Finance 6. Bozo finds the following information online: the 10-year US treasury note is yielding 3.8%, and the beta of the stock he is following, Clown Co. (CC) is 2.0. The required return for CC is 18%. What is the expected return of the market? If the Federal Reserve raises the 10-year notes to 4.5%, what would the new expected return be for CC?
3b. You read in the Wall Street Journal that 30-day treasury bills are currently yielding 8%. You are informed by a broker the following estimates of current interest rate premium: . Inflation premium = 5% • Liquidity premium = 1% Maturity risk premium = 2% Default risk premium = 2% Disregard cross product terms, i.e., if averaging is required, use the arithmetic average. On the basis of these data, what is the real risk-free rate of return.

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