A one-year bond currently pays 3.6% interest. It's expected that it will pay 3.1% next year and 2.0% the following year. The two-year term premium is 0.1% while the three-year term premium is 0.15%. What is the interest rate on a three-year bond according to the liquidity premium theory? O 3.00% O 1.15% O 3.05% O 2.9%

A bond quotes a rate of return of 5% and will pay $1,000 in one year with a probability of 42% and $0 with a probability of 58%.   part A)What is the time premium?   part B)What is the default premium?

Suppose you can observe that 1-year bond interest rate is 4%, 2-year bond interest rate is 8%, and 3-year bond interest rate is 10% at time t. It is also known that the term premium on a 2-year bond is 1% and the term premium on a 3-year bond is 1.5%. a) What are the market's expected 1-year bond interest rates for the next two years from time t? b) How to interpret those expected short-term interest rates? (what would be the "possible" economic meanings in the expected short- term interest rates?) Discuss as least two "candidates" to explain them.

Suppose the current YTM on a 5-year T-Bond is 2.8% and the current YTM for a 1-year T-Bond is 0.75%. What is the 5-year term premium if the expected 1-year rates for thenext 4 years are 1.25%, 1.75%, 2.5%, and 3.25%?

Suppose the current one-year interest rate is 3%. Also assume that financial markets expect the one-year interest rate next year to be 4%, and expect the one-year rate to be 5% the year after that. Given this information, the yield to maturity on a three-year bond will be approximately 15% OA. 5% В. Ос. 6% 12% O D. O E 4%

If over the next three years, the expected path of 1-year interest rates is 1%, 2%, and 3%, and the term premium is 0.25%, 0.50%, and 0.75% for the next three years, respectively. The liquidity premium theory of the term structure predicts that the current interest rate on 3-year bond is Select one: O a. 7.5% O b. 2.5% O c. 2.0% O d. 2.75%

According to the expectations theory, what will be the interest rate on a three-year bond if the two-year term permum is 1.0% while the three year term premium is 2.0%, and a one-year bond has an interest rate of 4% and is expected in have an interest rate of 5% next year and 6% in two year ? Select one: A. 5.0% B. 15.0% C. 4.09 D. 6.0%

Assume that a bond makes 30 equal annual payments of \$1,000$1,000 starting one year from today. (This security is sometimes referred to as an amortizing bond.) If the discount rate is 3.5\%3.5% per annum, what is the current price of the bond?

The one-year interest rates over the next three years are expected to be 5%, 4.5%, and 4%, Investors' preferences for holding short-term bonds have the liquidity premiums for one-year to three-year bonds as 0%, 0.2%, and 0.35%, respectively. What is the interest rate on a two-year bond? O a. 4.5% O b. 4.75% O c. 4.95% O d. 5.1% O e. 5.3%

Assume a bond with a 10% annual rate has 8 years left to maturity when market rates are at 12%.  Assume semi-annual payments.  What is the price of the bond at 3 different points in time - today, in 1 year, and in 2 years.  Is this a discount or premium bond, and what do you notice about the relationship between the price and maturity value (FV) over time?