Today in the United States, the interest rate on 10-year government bonds was 1.65%, and the interest rate on 10-year TIPS was -0.51%. Today, what can be estimated to be the real interest rate on 10-year government bonds and the expected inflation rate for the next 10 years?
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Today in the United States, the interest rate on 10-year government bonds was 1.65%, and the interest rate on 10-year TIPS was -0.51%. Today, what can be estimated to be the real interest rate on 10-year government bonds and the expected inflation rate for the next 10 years?
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- You observe that the current interest rate on short-term U.S. Treasury bills is 4.86 percent. You also read in the newspaper that the GDP deflator, which is a common macroeconomic indicator used by market analysts to gauge the inflation rate, currently implies that inflation is 1.65 percent. What is the approximate real rate of interest on short-term Treasury bills? (Enter your answer as a percent rounded to 2 decimal places.)Suppose we have the following Treasury bill returns and inflation rates over an eight year period: Year Treasury Bills Inflation 1 10.45% 12.55% 2 11.36 16.00 3 9.06 10.29 4 8.34 7.97 5 8.88 10.29 6 11.23 12.77 7 14.11 16.98 8 15.97 16.90 a. Calculate the average return for Treasury bills and the average annual inflation rate for this period. (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) Treasury bills % Inflation % b. Calculate the standard deviation of Treasury bill returns and inflation over this period. (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) Treasury bills % Inflation %…In the United Kingdom, the inflation rate is 1.8 per cent per year and that T-bills currently yield 2.1 per cent annually. What do you estimate the inflation rate to be in Australia if short-term Australian government securities yield 4 per cent per year?
- If the interest rate on one year govt. bonds is 6.0% and the inflation rate is 2.0%, what is the real interest rate?Compounded inflation The U.S. government reports the rate of inflation (as measured by the Consumer Price Index) both monthly and annually. Suppose that for a particular month, the monthly rate of inflation is reported as 0.8%. Assuming that this rate remains constant, what is the corresponding annual rate of inflation? Is the annual rate 12 times the monthly rate? Explain.9. During the first week of May 2008, the nominal interest rate on 30-year fixed-rate mortgage loans as reported by the Wall Street Journal was 6 percent per year. (a) Suppose that the inflation rate in the United States turns out to be 3 percent per year, on average, over the next 30 years. What will the real interest rate on these mortgage loans be in this case? (b) Suppose that, instead, US inflation turns out to be 5 percent per year, on average, over the next 30 years. What will the real interest rate on mortgage loans be in this case? (c) Who "wins," in the sense of being better off financially, if inflation turns out to be 5 percent instead of 3 percet: the households who take out new mortgage loans today at 6 percent, or the banks that make new mortgage loans today at 6 percent?
- Treasury bills are currently paying 9 percent and the inflation rate is 4.5 percent. What is the approximate real rate of interest?Suppose a U.S treasury bond will pay $4,150 five years from now. If the going interest rate on 5-year treasury bond is 4.25%, how much is the bond worth today?Inflation, nominal interest rates, and real rates. From 1991 to 2000, the U.S. economy had an annual inflation rate of around 3.88%. The historical annual nominal risk-free rate for this same period was around 5.98%. Using the approximate nominal interest rate equation and the true nominal interest rate equation, compute the real interest rate for that decade. What is the estimated real interest rate using the approximate nominal interest rate equation for that decade? % (Round to two decimal places.)
- You observe that the inflation rate in the United States is 1.3 percent per year and that T- bills currently yield 1.8 percent annually. Use the approximate international Fisher effect to answer the following questions. a. What do you estimate the inflation rate to be in Australia, if short-term Australian government securities yield 8 percent per year? (Enter your answer as a percent rounded to 1 decimal place, e.g., 32.1.) b. What do you estimate the inflation rate to be in Canada, if short-term Canadian government securities yield 11 percent per year? (Enter your answer as a percent rounded to 1 decimal place, e.g., 32.1.) c. What do you estimate the inflation rate to be in Taiwan, if short-term Taiwanese government securities yield 13 percent per year? (Enter your answer as a percent rounded to 1 decimal place, e.g., 32.1.) X Answer is complete but not entirely correct. a. Australian inflation rate b. Canadian inflation rate c. Taiwanese inflation rate 0.5 X % 5.5 X % 7.5 X %Suppose on January 15, 2030, the U.S. Treasury issued ten-year inflation indexed note with a coupon of 6%. On the date of issue, the consumer price index (CPI) was 300. If the CPI decreases to 250 by January 15, 2040, what principal and coupon payment will be made on January 15, 2040? (Note: U.S. Treasury pays semi-annual coupons) ww. The CPI will be deppreciated by. (Round to five decimal places.) The principal payment on maturity will be $ The semi-annual coupon payment on maturity (Round to the nearest cent.) will be $ (Round to the nearest cent.)Suppose we have the following Treasury bill returns and inflation rates over an eight- year period: Year Treasury Bills 1 2 3 4 5 6 7 8 7.37% 8.07 5.95 Treasury bills Inflation 5.15 5.53 7.72 10.64 12.18 Inflation 8.79% 12.42 7.02 4.94 6.78 9.10 13.37 12.60 a. Calculate the arithmetic average return for Treasury bills and the average annual inflation rate (consumer price index) for this period. (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) Average return % %