Thank You You are given the following series of one-year interest rates:5%, 7%, 12%, 12%10-Assuming that the expectations theory is the correct theory of the term structure, calculate the interestrates in the term structure for maturities of one to four years, and plot the resulting yield curve.8-1. Using the point drawing tool, plot the interest rate (calculated using the data above) for each of the fourterms to maturity. Properly label each point according to its corresponding term.2. Using the 4-point curved line drawing tool, connect these points. Label your curve 'yield curve'.Carefully follow the instructions above, and only draw the required objects.5-43-2-23Years to maturity.....Yield The table below shows current and expected future one-year interest rates, as well as current interest rates on multiyear bonds. Use the table to calculate the liquidity premium for each multiyear bond.One-Year BondYearMultiyear Bond RateRate12.00%2.00%23.00%3.00%36.00%4.00%48.00%5.00%10.00%7.00%The liquidity premiums for each year are given as: (Enter your responses rounded to two decimal places.)11= 00 %121= 0.50 %31 =40.33 %41 =%%3D151%3D

The theory which holds that expectations about future rates of interest tend to account for the…

Answered: You are given the following series of…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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The real risk-free rate is 4%. Inflation is expected to be 3% this year, 4% next year, and then 3% thereafter. The maturity risk premium is estimated to be 0.0003 x (t - 1), where t = number of years to maturity. What is the nominal interest rate on a 7-year Treasury security? Do not round intermediate calculations. Round your answer to two decimal places.
The real risk-free rate is 3.05%. Inflation is expected to be 3.15% this year, 5% next year, and then 2.55% thereafter. The maturity risk premium is estimated to be0.05(t - 1)%, where t = number of years to maturity. What is the yield on a 7-year Treasury note? Round your answer to two decimal places
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ECONOMICS
A bond with a coupon rate of 11 percent sells at a yield to maturity of 12 percent. If the bond matures in 10 years, what is the Macaulay duration? Note: Do not round intermediate calculations. Round your answer to 3 decimal places. Macaulay duration years
Recently, the European Central Bank (ECU) has been worried about inflation and thus needs to make a decision about interest rates, and thus the resulting bond prices. Assume we are talking about Euron an Savings Bonds (ESB) and you are given the following information: The European Savings Bond (ESB) has no expiration date: The ESB price =$1,000 the ESB has a fixed annual interest payment =$10, ' e ESB annual interest rate =10 percent. If the price of the ESB increases to $5,000, the interest rate will Multiple Choice ◻ rise to 50 percent. ◻ fall to 4 percent. ◻ fall to 5 percent. ◻ rise to 12 percent. ◻ fall to 2 percent.
A 30-year maturity bond with face value of $1,000 makes semiannual coupon payments and has a coupon rate of 8%. Note: Do not round intermediate calculations. Enter your answers as a percent rounded to 3 decimal places. What is the yield to maturity if the bond is selling for $900? What is the yield to maturity if the bond is selling for $1,000? What is the yield to maturity if the bond is selling for $1,100?
If the 1rst year rate for the next 5 years is expected to be 6%, 7%,8%, 9%,10% and the preference of the investors for short term bonds mean that the liquidity fees for 1 to 5 years is:0%, 0.5%, 1%, 1.5%, 2%, calculate the interest rates that the liquidity theory predicts. Analyse the theory and design the yield curve
(c) Let r(t), t > 0, be an instantaneous interest rate which is a non-decreasing and differentiable. Show that the associated yield curve 7(t) is also non-decreasing.
Suppose that on January 1, 2023, the price of a one-year Treasury bill with a face value of $1,000 is $940.01. Investors expect that the inflation rate will be 3% during , but at the end of the year, the inflation rate turns out to have been 2%. he nominal interest rate on the bill (measured as the yield to maturity) is enter your response here %. (Round your response to two decimal places.)
Assume that it is January 1, 2003. The rate of inflation is expected to be 4 percent thought 2003. However, increased government deficits and renewed vigor in the economy are then expected to push information rates higher. Investors expect the inflation rate to be 5 percent in 2004, 6 per percent cent in 2005, and 7 percent in 2006. The real risk-free rate, k*, is expected to remain at 2 percent over the next 5years. Assume that on maturity risk premiums are required on bonds with 5 years of less to maturity. The current interest rate on 5 year T-bonds is 8 Percent. What is the average expected inflation rate over the next 4 year? What should be the prevailing interest rate on 4-year T-bond? What is the implied expected inflation rate in 2007, or Year 5, give that Treasury bonds which mature in the year yield 8 percent?
Consider a US Treasury bill with one-year maturity and face value of $1,000 that sells for $900 today. Using this information, determine the yield to maturity for this discount bond. Yield to maturity (in percent, two decimal places) = Recall, interest rates on discount bonds are often quoted in terms of yield on a discount basis. For the sake of comparison, also determine the yield on a discount basis for this bond. Yield on a discount basis (in percent, two decimal places) =

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