The yield curve for default-free zero-coupon bonds is currently as follows: Maturity (years) YTM 11.0% 1 2 3 Required: a. What are the implied one-year forward rates? (Do not round intermediate calculations. Round your answers to 2 decimal places.) Maturity (years) 1 2 3 12.0 13.0 YTM YTM 11.0% 12.0% 13.0% c. What will be the yield to maturity on two-year zeros? (Do not round intermediate calculations. Round your answers to 2 decimal places.) % Forward rate Expected total rate of return d. If you purchase a two-year zero-coupon bond now, what is the expected total rate of return over the next year? (Hint Compute the current and expected future prices.) Ignore taxes. (Do not round intermediate calculations. Round your answer to 2 decimal places.) % % Expected total rate of return % e. If you purchase a three-year zero-coupon bond now, what is the expected total rate of return over the next year? (Hint: Compute the current and expected future prices.) Ignore taxes. (Do not round intermediate calculations. Round your answer to 2 decimal places.)

The yield curve for default-free zero-coupon bonds is currently as follows: Maturity (years) YTM 11.0% 1 2 3 Required: a. What are the implied one-year forward rates? (Do not round intermediate calculations. Round your answers to 2 decimal places.) Maturity (years) 1 2 3 12.0 13.0 YTM YTM 11.0% 12.0% 13.0% c. What will be the yield to maturity on two-year zeros? (Do not round intermediate calculations. Round your answers to 2 decimal places.) % Forward rate Expected total rate of return d. If you purchase a two-year zero-coupon bond now, what is the expected total rate of return over the next year? (Hint Compute the current and expected future prices.) Ignore taxes. (Do not round intermediate calculations. Round your answer to 2 decimal places.) % % Expected total rate of return % e. If you purchase a three-year zero-coupon bond now, what is the expected total rate of return over the next year? (Hint: Compute the current and expected future prices.) Ignore taxes. (Do not round intermediate calculations. Round your answer to 2 decimal places.)

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

Ef 524.

The yield curve for default-free zero-coupon bonds is currently as follows:
Maturity (years) YTM
11.0%
2
3
Required:
a. What are the implied one-year forward rates? (Do not round intermediate calculations. Round your answers to 2
decimal places.)
Maturity (years)
1
2
3
12.0
13.0
YTM
YTM
11.0%
12.0%
13.0%
c. What will be the yield to maturity on two-year zeros? (Do not round intermediate calculations. Round your answers
to 2 decimal places.)
%
Forward rate
Expected total rate of return
d. If you purchase a two-year zero-coupon bond now, what is the expected total rate of return over the next year? (Hint
Compute the current and expected future prices.) Ignore taxes. (Do not round intermediate calculations. Round your
answer to 2 decimal places.)
Expected total rate of return
%
%
%
e. If you purchase a three-year zero-coupon bond now, what is the expected total rate of return over the next year?
(Hint: Compute the current and expected future prices.) Ignore taxes. (Do not round intermediate calculations. Round
your answer to 2 decimal places.)
%

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0271 20161 122oint and wong liw vitorioss of 10 2016 621 570111507780002 Question 50 vd mwob 250g abnod to oulay jud asiduob loota to oulsy od viqinda WOT ST6 201611291910 e vibrd, col vimonces adt milt once and T: E renso2 You are given the following information for two assets Uno and Dos: u yo qu909 DOGO TO SLolato sulsv onT reda ai Expected rate of return Variance of return srüster2 (1) 0.0595 0.0384 0.0153 ort ano 0.0153 29:01 ano Asset Uno W bas Wydb Dos rifesw 0.2315 VISM 1 odtwob stiW bus x to noitonuts as zonesse sondt orlt to ross tot visvitsogasn 26 At a market risk premium of 3.5% and a risk-free rate of 2%, determine which asset is considered riskier by analyzing their systematic and unsystematic risks. mvilu a visM szoqquz W bas W. W to noitonuts as vilitu botooqxo a'vM to noia201qxs si nwob in W v bas xto esuley sri bait sidizzoq zi sim ooit-lain odi is gaibasl bas gniwonod goimwezA viilitu botoqxo a'vieM eximixem lliw jedi MOT
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