Ask Question, Ask an Expert

+1-415-315-9853

info@mywordsolution.com

Ask Basic Finance Expert

A thirty- year U. S. Treasury bond has a 4.0 percent interest rate.

In contrast, a ten- year Treasury bond has an interest rate of 2.5 percent. A maturity risk premium is estimated to be 0.2 percentage points for the longer maturity bond. Investors expect inflation to average 1.5 percentage points over the next ten years.

a. Estimate the expected real rate of return on the ten- year U. S. Treasury bond.

b. If the real rate of return is expected to be the same for the thirty- year bond as for the ten- year bond, estimate the average annual inflation rate expected by investors over the life of the thirty- year bond.

Basic Finance, Finance

  • Category:- Basic Finance
  • Reference No.:- M939352

Have any Question? 


Related Questions in Basic Finance

Assessing interest rate differentials among countries in

Assessing Interest Rate Differentials among Countries : In countries experiencing high inflation, the annual interest rate may exceed 50 percent; in other countries, such as the United States and many European countries, ...

You estimate that you will owe 40300 in student loans by

You estimate that you will owe $40,300 in student loans by the time you graduate. The interest rate is 4.25 percent. If you want to have this debt paid in full within ten years, how much must you pay each month? Atlas In ...

Regarding to capital structure calculate the following

Regarding to Capital Structure, calculate the following measures for three years of FLIGHT CENTRE AUSTRALIA 1. Capital structure (i.e., the percentage of debt and percentage of equity) 2. Cost of common equity and (if an ...

You are a bright new hire in the risk-management division

You are a bright new hire in the risk-management division at SoftCola, a multinational cola company, and have recently been put in charge of managing the euro/dollar exchange-rate risks that SoftCola faces. Consider Soft ...

Systemic risk explain how systemic risk is related to the

Systemic Risk: Explain how systemic risk is related to the commercial paper market. That is, why did problems in the market for mortgage-backed securities affect the commercial paper market?

Discuss what will happen to the discount factors used to

Discuss what will happen to the discount factors used to determine prices of previously issued bonds sold in secondary markets, given the following scenarios (see Appendix 13A): a. A company's earnings report comes in mu ...

Using pro-forma data attached prepare a net present value

Using pro-forma data attached prepare a net present value analysis using the data in the example and substitute the 5% hurdle rate in the problem to a 6% hurdle rate, and prepare a profitability index. Do not consider ca ...

Regarding anovaexplain the difference between the

Regarding ANOVA: Explain the difference between the "Between-Treatments Estimate of Variance and the Within-Treatments Estimate of Variance. Why do we need two estimates? Wouldn't one estimate suffice?

In what form can a depository institution hold reserveswho

In what form can a depository institution hold reserves? Who determines the amount of funds available for reserves? How does the Fed infl uence the amount of reserves a depository institution must hold?

Discuss or define briefly the following terms and

Discuss or define briefly the following terms and concepts: means of payment, store of value, unit of account, barter, monetary aggregates, liquidity, nonfinancial debt, electronic funds transfer system, and risk.

  • 4,153,160 Questions Asked
  • 13,132 Experts
  • 2,558,936 Questions Answered

Ask Experts for help!!

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.

Ask Now Help with Problems, Get a Best Answer

A cola-dispensing machine is set to dispense 9 ounces of

A cola-dispensing machine is set to dispense 9 ounces of cola per cup, with a standard deviation of 1.0 ounce. The manuf

What is marketingbullwhat is marketing think back to your

What is Marketing? • "What is marketing"? Think back to your impressions before you started this class versus how you

Question -your client david smith runs a small it

QUESTION - Your client, David Smith runs a small IT consulting business specialising in computer software and techno

Inspection of a random sample of 22 aircraft showed that 15

Inspection of a random sample of 22 aircraft showed that 15 needed repairs to fix a wiring problem that might compromise

Effective hrmquestionhow can an effective hrm system help

Effective HRM Question How can an effective HRM system help facilitate the achievement of an organization's strate