The following table shows the prices of a sample of Treasury bonds, all of which have coupon rates of zero. Each bond makes a single payment at maturity. Years to Price (% of Maturity face value) 1 2 3 4 98.352% 94.851 91.044 86.980 a. What is the 1-year interest rate? Note: Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. b. What is the 2-year interest rate? Note: Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. c. What is the 3-year interest rate? Note: Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. d. What is the 4-year interest rate? Note: Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. e. Is the yield curve upward-sloping, downward-sloping, or flat? f. Is this the usual shape of the yield curve? Answer is complete but not entirely correct. a. Interest rate 1.68% b. Interest rate Interest rate d. Interest rate e. Is the yield curve upward-sloping, downward-sloping, or flat? f. Is this the usual shape of the yield curve? 2.05% 2.76% X 3.42% x Upward-sinping Yes
The following table shows the prices of a sample of Treasury bonds, all of which have coupon rates of zero. Each bond makes a single payment at maturity. Years to Price (% of Maturity face value) 1 2 3 4 98.352% 94.851 91.044 86.980 a. What is the 1-year interest rate? Note: Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. b. What is the 2-year interest rate? Note: Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. c. What is the 3-year interest rate? Note: Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. d. What is the 4-year interest rate? Note: Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. e. Is the yield curve upward-sloping, downward-sloping, or flat? f. Is this the usual shape of the yield curve? Answer is complete but not entirely correct. a. Interest rate 1.68% b. Interest rate Interest rate d. Interest rate e. Is the yield curve upward-sloping, downward-sloping, or flat? f. Is this the usual shape of the yield curve? 2.05% 2.76% X 3.42% x Upward-sinping Yes
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:The following table shows the prices of a sample of Treasury bonds, all of which have coupon rates of zero. Each bond makes a single
payment at maturity.
Years to Price (% of
Maturity
face value)
1
2
3
4
98.352%
94.851
91.044
86.980
a. What is the 1-year interest rate?
Note: Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.
b. What is the 2-year interest rate?
Note: Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.
c. What is the 3-year interest rate?
Note: Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.
d. What is the 4-year interest rate?
Note: Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.
e. Is the yield curve upward-sloping, downward-sloping, or flat?
f. Is this the usual shape of the yield curve?
Answer is complete but not entirely correct.
a. Interest rate
1.68%
b. Interest rate
Interest rate
d. Interest rate
e. Is the yield curve upward-sloping, downward-sloping, or flat?
f. Is this the usual shape of the yield curve?
2.05%
2.76% X
3.42% x
Upward-sinping
Yes
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