Based on economists’ forecasts and analysis, 1-year Treasury bill rates and liquidity premiums for the next four years are expected to be as follows: R1 = 2.00 % E(2r1) = 2.90 % L2 = 0.06 % E(3r1) = 3.30 % L3 = 0.08 % E(4r1) = 3.75 % L4 = 0.13 % Using the liquidity premium theory, determine the current (long-term) rates. (Do not round intermediate calculations. Round your answers to 2 decimal places.) Based on economists’ forecasts and analysis, 1-year Treasury bill rates and liquidity premiums for the next four years are expected to be as follows: R1 = 2.00 % E(2r1) = 2.90 % L2 = 0.06 % E(3r1) = 3.30 % L3 = 0.08 % E(4r1) = 3.75 % L4 = 0.13 % Using the liquidity premium theory, determine the current (long-term) rates. (Do not round intermediate calculations. Round your answers to 2 decimal places.) Years Current (Long-term) Rates 1 % 2 % 3 % 4 %
Debenture Valuation
A debenture is a private and long-term debt instrument issued by financial, non-financial institutions, governments, or corporations. A debenture is classified as a type of bond, where the instrument carries a fixed rate of interest, commonly known as the ‘coupon rate.’ Debentures are documented in an indenture, clearly specifying the type of debenture, the rate and method of interest computation, and maturity date.
Note Valuation
It is the process to determine the value or worth of an asset, liability, debt of the company. It can be determined by many processes or techniques. Many factors can impact the valuation of an asset, liability, or the company, like:
Based on economists’
| R1 | = | 2.00 | % | |||||
| E(2r1) | = | 2.90 | % | L2 | = | 0.06 | % | |
| E(3r1) | = | 3.30 | % | L3 | = | 0.08 | % | |
| E(4r1) | = | 3.75 | % | L4 | = | 0.13 | % | |
Using the liquidity premium theory, determine the current (long-term) rates. (Do not round intermediate calculations. Round your answers to 2 decimal places.)
Based on economists’ forecasts and analysis, 1-year Treasury bill rates and liquidity premiums for the next four years are expected to be as follows:
| R1 | = | 2.00 | % | |||||
| E(2r1) | = | 2.90 | % | L2 | = | 0.06 | % | |
| E(3r1) | = | 3.30 | % | L3 | = | 0.08 | % | |
| E(4r1) | = | 3.75 | % | L4 | = | 0.13 | % | |
Using the liquidity premium theory, determine the current (long-term) rates. (Do not round intermediate calculations. Round your answers to 2 decimal places.)
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