You will receive $100 from a savings bond in 4 years. The nominal interest rate is 7.90%. a) What is the present value of the proceeds from the bond? Note: Do not round intermediate calculations. Round your answer to 2 decimal places. b)If the inflation rate over the next few years is expected to be 2.90%, what will the real value of the $100 payoff be in terms of today's dollars? Note: Do not round intermediate calculations. Round your answer to 2 decimal places. c)What is the real interest rate? Note: Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. d)Calculate the real payoff from the bond [from part (b)] discounted at the real interest rate [ from part (c)]. Note: Do not round intermediate calculations. Round your answer to 2 decimal places.

You will receive $100 from a savings bond in 4 years. The nominal interest rate is 7.90%. a) What is the present value of the proceeds from the bond? Note: Do not round intermediate calculations. Round your answer to 2 decimal places. b)If the inflation rate over the next few years is expected to be 2.90%, what will the real value of the $100 payoff be in terms of today's dollars? Note: Do not round intermediate calculations. Round your answer to 2 decimal places. c)What is the real interest rate? Note: Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. d)Calculate the real payoff from the bond [from part (b)] discounted at the real interest rate [ from part (c)]. Note: 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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Today is the 10th January 2023. You want to buy a Floating Rate Note (FRN) that matures on the 10th July 2027 and pays an annual coupon equal to LIBOR. Compute the fair price of the note. Use the data in Table 1. The LIBOR rate at selected dates are showed in Table 3. Please show your calculations. Discuss your result. Rates are continuously compounded- see attached image
Assume that a three-year treasury note (T - note) has no maturity premium, and that the real risk - free rate of interest is 5 percent. If the T - note varries a nominal risk rate of return of 13 perent and if the expected average infaltion rate over the next two years is 9 percent, what is the implied expected inflation rate during Year 3 ?
9.) Consider the following information regarding a credit default swap that you want to buy. The default swap offers three years of coverage with the possible default occurring at the end of year one, year two or year three. The face value of the bond to bond to be covered is $1,000,000. The recovery rate for such bonds is 35%. The probability of default in any given year is 5%. The STRIP rates for one, two and three years are 1%, 2% and 3% respectively. credit default swap? How much would you pay for this
The real risk-free rate is 1.95%. Inflation is expected to be 2.95% this year, 4.25% next year, and 2.1% thereafter. The maturity risk premium is estimated to be 0.05 × (t - 1)%, where t = number of years to maturity. What is the yield on a 7-year Treasury note? Do not round intermediate calculations. Round your answer to two decimal places.
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The current one-year T-bill rate is .50 percent and the expected one-year rate 12 months from now is 1.38 percent. According to the unbiased expectations theory, what should be the current rate for a two-year Treasury security? (Do not round intermediate calculations. Round your answer to 2 decimal places. (e.g., 32.16)) Current rate= %
Suppose that the coupon rate for a TIPS is 5%. Suppose further that an investor purchases $10,000 of par value (initial principal) of this issue today and that the annual inflation rate is 3.5%. 1. What is the (inflation-adjusted) dollar coupon interest that will be paid in cash at the end of the first six months? 2. What is the (inflation-adjusted) dollar coupon interest that will be paid in cash at the end of the second six months? 3. What is the inflation-adjusted principal at the end of the 2nd six months?
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The real risk-free rate is 3.5% and inflation is expected to be 2.25% for the next 2 years. A 2-year Treasury security yields 6.45%. What is the maturity risk premium for the 2-year security? Round your answer to one decimal place. %
I need help with this question
he real short-term risk - free rate is 0.5% and the expected inflation rate is 1% for each of the next three years, and 1.5% for each of the following two years. Two - year Treasury notes yield 2.9% and five - year Treasury notes yield 4.1%. What is the maturity risk premium on the two year note?

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