+1-415-315-9853

info@mywordsolution.com

## Finance

 Basic Finance Corporate Finance Financial Management Financial Econometrics Portfolio Management Risk Management Public Finance Business Law & Ethics

problem 1: Assume that the interest rate on a 1-year T-bond is 5.0% and that on a 2-year T-bill is 6.0%. Supposing the pure expectations theory is right, what is the market's forecast for 1-year rates 1 year from now?

a) 6.65%
b) 6.74%
c) 6.83%
d) 6.92%
e) 7.01%

problem 2: The real risk-free rate is 3%. Inflation is expected to be 4% this coming year, jump to 5% next year and raise to 6% the year after. According to the expectations theory, what must be the interest rate on 3-year, risk-free securities nowadays?

a) 18%
b) 12%
c) 6%
d) 8%
e) 10%

problem 3: One-year Treasury securities yield 5%, 2-year Treasury securities yield 5.5%, and 3-year Treasury securities yield 6%. Suppose that the expectations theory holds. What does the market expect will be the yield on 1-year Treasury securities two years from now?

a) 6.01%
b) 6.51%
c) 7.01%
d) 7.51%
e) 8.01%

problem 4: Given the following data, find out the expected rate of inflation throughout the next year. Disregard cross-product terms, that is, if averaging is needed, use the arithmetic average.

• r* = real risk-free rate = 3%.
• Maturity risk premium on 10-year T-bonds = 2%. This is zero on 1-year bonds, and a linear relationship exists.
• Default risk premium on 10-year, A-rated bonds = 1.5%.
• Going interest rate on 1-year T-bonds = 8.5%.

a) 3.5%
b) 4.5%
c) 5.5%
d) 6.5%
e) 7.5%

problem 5: The real risk-free rate is predicted to remain constant at 3%. Inflation is expected to be 2% a year for the next 3-years, and then 4% a year afterward. The maturity risk premium is 0.1 % (t − 1), where t equals the maturity of the bond. A 5-year corporate bond has a yield of 8.4%. Determine the yield on a 7-year corporate bond that has similar default risk and liquidity premiums as the 5-year corporate bond? Disregard cross-product terms, that is, if averaging is required, use the arithmetic average.

a) 8.73%
b) 8.94%
c) 8.65%
d) 7.98%
e) 9.24%

Basic Finance, Finance

• Category:- Basic Finance
• Reference No.:- M97091

Have any Question?

## Related Questions in Basic Finance

### An authorised deposit institution adi issued a 6 january

An Authorised Deposit Institution (ADI) issued a 6% January 2016 bond with a face value of \$15 000 on 31 January 2012 at a yield of 7%. Assume that coupon payments are made every six months. The bond was sold on 31 Janua ...

### Given xyzs assets are currently worth 17b and that the risk

Given: XYZ's assets are currently worth \$1.7B and that the risk free rate is 10% P/A [annual compounding; a year from now, the value of XYZ assets will be either be worth \$2.2 B or \$1.6 B. XYZ issued some time ago a zero ...

### 1 why was the fujita-pearson tornado scale updated in 2006

1. Why was the Fujita-Pearson Tornado Scale updated in 2006, and what changes were made? 2. What are the three categories of wildland fires? 3. How are severe weather storms measured? 4. What single disaster type caused ...

### 1 why can the current movement toward establishing supply

1. Why can the current movement toward establishing supply chains be characterized as a revolution? 2. Compare the concept of a modern supply chain with more traditional distribution channels. Be specific regarding simil ...

### 1 determine what special needs populations exist in your

1. Determine what special needs populations exist in your community. Select one, and find out whether special preparedness and emergency planning considerations have been made to accommodate their unique needs. 2. Assist ...

### 1 what factors should an investor consider when trying to

1. What factors should an investor consider when trying to decide whether to dispose of a property that he has owned for several years? 2. What causes the marginal rate of return to change over time? How can the marginal ...

### Determine the mass transfer coefficient kc for the transfer

Determine the mass transfer coefficient, kc, for the transfer from a glucose sphere, 0.3 cm in diameter, which is sub merged in a 25°C aqueous stream flowing at a bulk velocity of 0.15 m/s. The mass diffusivity of glucos ...

### 1 when the german government succeeded in putting an end to

1. When the German government succeeded in putting an end to the hyperinflation in 1924, would this have been better news for borrowers or for lenders? Briefly explain. 2. In 1919, the British economist John Maynard Keyn ...

### Briefly explain in which of the following situations moral

Briefly explain in which of the following situations moral hazard is likely to be less of a problem. a. A manager is paid a flat salary of \$150,000. b. A manager is paid a salary of \$75,00 plus 10% of the firm's profits.

### Sammies club wants to buy a 320000-square-foot distribution

Sammie's Club wants to buy a 320,000-square-foot distribution facility on the northern edge of a large midwestern city. The subject facility is presently renting for \$4 per square foot. Based on recent market activity, t ...

• 13,132 Experts

## Looking for Assignment Help?

Start excelling in your Courses, Get help with Assignment

Write us your full requirement for evaluation and you will receive response within 20 minutes turnaround time.

### Section onea in an atwood machine suppose two objects of

SECTION ONE (a) In an Atwood Machine, suppose two objects of unequal mass are hung vertically over a frictionless

### Part 1you work in hr for a company that operates a factory

Part 1: You work in HR for a company that operates a factory manufacturing fiberglass. There are several hundred empl

### Details on advanced accounting paperthis paper is intended

DETAILS ON ADVANCED ACCOUNTING PAPER This paper is intended for students to apply the theoretical knowledge around ac

### Create a provider database and related reports and queries

Create a provider database and related reports and queries to capture contact information for potential PC component pro

### Describe what you learned about the impact of economic

Describe what you learned about the impact of economic, social, and demographic trends affecting the US labor environmen