▪ Using Pure Expectations theory to predict future rates: I Suppose: 1¹₁= 1%, 1¹₂= 2%, 113= 3% What does that imply about the 1-year forward rate in 2 years (3₁), and the 2-year forward rate in 1 year (₂f₂)?
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- Unbiased Expectations Theory Suppose that the current one-year rate (one-year spot rate) and expected one-year T-bill rates over the following three years (i.e., years 2, 3, and 4, respectively) are as follows 1R1=4.35%, E(2r1) =5.35%, E(3r1) =5.85%, E(4r1)=6.20% Using the unbiased expectations theory, what is the current (long-term) rate for four-year-maturity Treasury securities?Suppose that the current one-year rate (one- year spot rate) and expected one-year T-bill rates over the following three years (i.e., years 2, 3, and 4, respectively) are as follows: 1R1=6%, E(2r1) =7%, E(3r1) =7.5% E(4r1)=7.85% 1 Using the unbiased expectations theory, calculate the current (long-term) rates for one-, two-, three-, and four-year-maturity Treasury securities. Show your answers in percentage form to 3 decimal places.Suppose that the current 1-year rate ( 1-year spot rate) and expected 1-year T-bill rates over the following three years (i.e years 2,3, and 4 respectively) as follows: 1R1=3.22%, E(2r1)=4.65%,E(3r1)=5.15%,E(4r1)=6.65% Using the unbiased expectations theory, calculate the current (long-term) for one-, two-, three-, and four- year- maturity treasury securities. ( Round your answers to 2 decimal places.)
- Suppose that the current one-year rate (one-year spot rate) and expected one-year T-bill rates over the following three years (i.e., years 2, 3, and 4, respectively) are as follows: 1R1 = 0.3%, E(2r 1) = 1.3%, E(3r1) = 10.4%, E(41) 10.75% Using the unbiased expectations theory, calculate the current (long-term) rates for one-, two-, three-, and four-year-maturity Treasury securities. (Round your percentage answers to 3 decimal places. (e.g., 32.161)) One-year Two-year Three-year Four-year Current (Long-Term) Rates 0.300 % 0.799 % 5.006% %1. Suppose the current one-year rate (one-year spot rate) and expected one-year T-bill rates over the following three year (i.e. years 2, 3, and 4, respectively) are as follows: 。R₁ = 6%, E (R₂) =7% E(₂R)= 7.5% E(R)=7.85% Using the unbiased expectations theory, calculate the current (long-term) rates for one-, two-, three-, and four-year maturity Treasury securities. Plot the resulting yield curve.QUESTION 1 Suppose that the current one-year rate and expected one-year T-bill rates over the following three years (i.e., years 2, 3, and 4, respectively) are as follows: IRI-2.47%, E(2rl)-3.11%, E(3rl)-4.23%, E(4rl)-5.18% Using the unbiased expectations theory, calculate the current rate for three-year- maturity Treasury securities (Write your answer in percentage not decimal for example 5.78%) current rate for three-year-maturity = 3.27%
- Suppose that the current 1-year rate (1-year spot rate) and expected 1-year T-bill rates over the following three years (i.e., years 2, 3, and 4, respectively) are as follows:1R1 = 6%, E(2r1) = 7%, E(3r1) = 7.5%, E(4r1) = 7.85%Using the unbiased expectations theory, calculate the current (long-term) rates for one-, two-, three-, and four-year-maturity Treasury securities. (Round your answers to 2 decimal places.)Suppose that the current 1-year rate (1-year spot rate) and expected 1-year T-bill rates over the following three years (I.e., years 2, 3, and 4, respectively) are as follows: 1R1 = 1%, E(211) = 4.30%, E(31) = 4.80%, E471) = 6.30% Using the unblased expectations theory, calculate the current (longterm) rates for 1-, 2-, 3-, and 4-year-maturity Treasury securities. Plot the resulting yield curve. (Do not round Intermediate calculations. Round your answers to 2 decimal places.) Year 1234 Current (Long-term) Rates %Suppose that the current 1-year rate (1-year spot rate) and expected 1-year T-bill rates over the following three years (i.e., years 2, 3, and 4, respectively) are as follows: 1R1 = 6%, E(2r1) = 7%, E(3r1) = 7.60%, E(4r1) = 7.95% Using the unbiased expectations theory, calculate the current (long-term) rates for one-, two-, three-, and four-year-maturity Treasury securities. (Round your answers to 2 decimal places.)
- Suppose that the current one-year rate (one-year spot rate) and expected one-year T-bill rates over the following three years (i.e., years 2, 3, and 4, respectively) are as follows:1R1 = 6%, E(2r1) = 7%, E(3r1) = 7.5%, E(4r1) = 7.85%Using the unbiased expectations theory, calculate the current (long-term) rates for one-, two-, three-, and four-year-maturity Treasury securities. Plot the resulting yield curve.Suppose that the current one-year rate and expected one-year T-bill rates over the following three years (vears 2, 3, and 4, respectively) are as follows: 1R1 = 0.6%, E(21) = 1.1%, E(3r1) = 1.8%, E(4r1) = 2.7% Using the unbiased expectations theory, calculate the current rates for two-, three-, and four- year maturity Treasury securities. Round your final answer to 2 decimal places using percentage format (ex. - 1.23% should be entered as 1.23). Don't round intermediate calculations. Two-year: % % Three-year: % Four-yearQuestion 3: (20 marks) Consider the following Table: YEAR 2018. 2019 2020 2021 2022 R(BOA) 28% 24% -6% 23% 20% R(WF) 26% 25% -9% 21% 26% R(M) Probability 0.35 0.15 0.20 0.15 0.15 32% 29% - 2% 31% 35% Calculate the following: 1. The Expected Returns for BOA, WF and the Market, respectively. 2. The Variances of the Returns for BOA, WF and the Market, respectively. 3. The Standard Deviations of the Returns for BOA, WF and the Market, respectively. 4. The Coefficients of Variation for BOA, WF and the Market, respectively. s. The Covariances for BOA and WF respectively. 6. The Betas for BOA and WF respectively. 7. The Correlation Coefficients for BOA and WF respectively. 8. Assume a Risk-Free Rate is 4%. Calculate the CAPM for BOA and WF stocks respectively. 9. What is the RISK PREMIUM for BOA and WF respectively? 10. Explain your answers carefully to support your findings.