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- D4) Finance If the foreign interest rate is 4%, the risk premium on domestic assets, ρ, is 18%, and the expected rate of depreciation of the domestic currency against the foreign currency is 3%, what is the domestic interest rate in percentage terms, given covered interest parity holds? [All variables have a 1-year time frame.]Suppose the U.S. Treasury offers to sell you a bond for $697.25. No payments will be made until the bond matures 4 years from now, at which time it will be redeemed for $1,000. What interest rate would you earn if you bought this bond at the offer price? a. 5.51% b. 35.86% c. 7.48% d. 9.43% e. 12.77%The Z company plans on issuing Euro denominated bond with a 7.5% yield to maturity or a $ denominated bond with 6.7% yields to maturity. If the Euro is expected to appreciate by 1.7%, what is the expected $ cost of issuing Euro denominated bonds? A.9.2000 B.9.3275 C.7.5000 D.5.8000
- a. The spot price of the British pound is currently $1.50. If the risk-free interest rate on 1-year government bonds is 1% in the United States and 2% in the United Kingdom, what must be the forward price of the pound for delivery one year from now?b. How could an investor make risk-free arbitrage profits if the forward price were higher than the price you gave in answer to part (a)? Give a numerical example.The quoted rate of interest is calculated using the following formula. Quoted Rate = r* + IP + DRP +LP + MRP Given the following information what is the risk free rate (RF) of the quote of the US Treasury Bill r* = 2% IP = 3% DRP = 3% LP = 3% MRP = 4% 2% Select 5% as your answer 5% Select 8% as your answer 8% Select 15% as your answer 15%If you are a U.S. international bond investor deciding to invest in one of the following 4 countries, assuming all other factors the same, based on the attached table, which country's bonds give you the lowest expected realized return? A B C OD I'S FI Country 1 yr A BUD в Current government Exchange Bond Yield Rate per 1 USD с 5% 6% 7% 8% 2 10 20 100 Forecasted lyr Exchange Rate per 1 USD 2 9 21 110
- Problem 3.3. Yields on money market instruments roblem 3.4. Calculate the following: a. If the overnight fed funds rate is quoted as 2.25 percent, what is the bond equivalent rate? b. Suppose a bank enters a repurchase agreement in which it agrees to buy Treasury securities from a correspondent bank at a price of Rs 24,950,000, with promise to buy them back at a price of Rs 25,000,000. Calculate the yield on the repo if it has 21 days to maturity. c. A government securities dealer is currently borrowing Rs 10 million from a money center bank using repurchase agreements based on Treasury bills. If today's repo rate is 5.5 percent, how much in interest will the dealer owe the bank for an overnight borrowing? d. A security dealer borrows Rs 25 million cash through repo from a company for one day. The dealer pays Rs 2,500 in interest on this loan. What is repo rate on this loan? You can buy commercial nanorCanadian Treasury bills are yielding 2.63%. The yield on a bond portfolio is 4.2%. If the inflation rate is 2.45%, approximately what is the real rate of return on the bond portfolio? Select one: O a. 1.57% O b. -0.18% O c. -1.75% O d. 1.75% O e. 0.18% KD6 Assume you own a 2-year US Treasury Note with a 5% coupon and a 7-year US Treasury Note with a 0% coupon. If market interest rates decrease by 100 basis points in the 2-year maturity and declined by only 75 basis points in the 7-year maturity, which bond would experience the smallest market value change? a. 5% US Treasury due in 2 years b. 0% US Treasury due in 7 years c. Both would change by the same amount d. Prices would not change since the coupons are fixed
- Treasury bond issued by U.S. government has 7 years of maturity. Coupon rate is 6% paid annually, Face value is $1000 and yield to maturity (Kd) equals 5%. 1. What is the price of bond (VB)? Find the discount or premium amount? 2. Calculate the current yield and expected capital gain yield? 3. If the discount rate is expected to raise up to 8%. What is the bond current market price (VB)?A Canadian bank that issues AUD 250M 5-year bonds to fund AUD 200M loans with 6-year maturity is exposed to the following risks : A depreciation of the Australian dollar against the Canadian plus credit plus liquidity risk plus reinvestment risk, i.e. decreasing interest rates. A depreciation of the Australian dollar against the Canadian dollar, plus credit risk plus liquidity risk plus refinancing risk, i.e. increasing interest rates. An appreciation of the Australian dollar against the Canadian dollar, plus credit risk plus refinancing risk, i.e. increasing interest rates. An appreciation of the Australian dollar against the Canadian dollar, plus credit risk plus reinvestment risk, i.e. decreasing interest rates.The nominal annual interest rate on 6-month USD Treasury Bill is 4.50%. The spot rate of the Euro is $3.8643, and the 6-month forward rate of the Euro is $3.8880. If interest rate parity holds, what is the nominal annual interest rate on a risk and default free 6-month Euro bonds?Immersive Reader A. 12.35% B. 3.25% C. 10.20% D. 2.20%
