If the interest rates on 1-, 5-, 10-, and 30-year bonds are 4%, 5%, 6%, and 7%, respectively, how would you describe the yield curve? If the rates were reversed, how would you describe it?
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If the interest rates on 1-, 5-, 10-, and 30-year bonds are 4%, 5%, 6%, and 7%, respectively, how would you describe the yield curve? If the rates were reversed, how would you describe it?
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- If the interest rates on 1-, 5-, 20-, and 30-year bonds are (respectively)4%, 5%, 6%, and 7%, then how would you describe the yield curve?How would you describe it if the rates were reversed?The rate of return that you would earn if you bought a bond and held It to its maturity date is called the bond's yield to maturity (YTM). If Interest rates in the economy rise after a bond has been issued, what will happen to the bond's price and to Its YTM? Does the length of time to maturity affect the extent to which a given change in interest rates will affect the bond's price? Briefly explain with necessary numerical data.Which of the following is TRUE concerning the distinction between interest rates and returns? Select one: a. The rate of return will be greater than the interest rate when the price of the bond falls during the holding period. b. The return can be expressed as the difference between the current yield and the rate of capital gains. c. The rate of return on a bond will not necessarily equal the interest rate on that bond. d. The return can be expressed as the sum of the discount yield and the rate of capital gains
- Can the price of bond B be determined using the PV function or any other function in excel? What is the EAR (effective annual rate) of these two bonds?The rate of return that you would earn if you bought a bond and held it to its maturity date is called the bond’s yield to maturity, or YTM. If interest rates in the economy rise after a bond has been issued, what will happen to the bond’s price and to its YTM? Does the length of time to maturity affect the extent to which a given change in interest rates will affect the bond’s price?A plot of the yields on bonds with different terms to maturity but the same risk, liquidity, and tax considerations is known as O A. a yield curve. B. a risk-structure curve. OC. a term-structure curve. 5- O D. an interest-rate curve. Suppose people expect the interest rate on one-year bonds for each of the next four years to be 3%, 6%, 5%, and 6%. If the expectations theory of the term structure of interest rates is correct, then the implied interest rate on bonds with a maturity of four years is nearest whole number). %. (Round your response to the 2- Refer to the figure on your right. Suppose the expected interest rates on one-year bonds for each of the next four years are 4%, 5%, 6%, and 7%, respectively. 1. 1.) Use the line drawing tool (once) to plot the yield curve generated. 3 Term to Maturity in Years 2.) Use the point drawing tool to locate the interest rates on the next four years. 5. 3- Interest Rate .....
- What is interest rate (or price) risk? Which bondhas more interest rate risk: an annual payment1-year bond or a 10-year bond? Why?What is the effective annual yield (or bond annual yield) implied by your answer to the above?The rate of return you would get if you bought a bond and held it to its maturity date is called the bond's yield to maturity. If interest rates in the economy rise after a bond has been issued, what will happen to the bond's price and to its yield to maturity? Does the length of time to maturity affect the extent to which a given change in interest rates will affect the bond's price?
- d. If you hold the bonds for one year, and interest rates do not change, what total rate of return will you earn, assuming that you pay the market price? Why is this different from the current yield and YTM?Which of the following measures the interest rate risk of a bond in dollars and cents? O Price Value of a Basis Point O Convexity O Modified Duration Duration.4. Given the expectations theory as the correct interpretation of the term structure, calculate and depict the yield curves for the provided series of one-year interest rates: 5%, 7%, 7%, 7%, 7% 5%, 4%, 4%, 4%, 4% a. b. How would your yield curves change if people preferred shorter-term bonds over longer- term bonds? Solution: