Week 1 HW

Problem 2-1 (LG 2-6) A particular security's equilibrium rate of return is 8 percent. For all securities, the inflation risk premium is 1.95 percent and the real risk-free rate is 3.2 percent. The security's liquidity risk premium is 0.25 percent and maturity risk premium is 0.95 percent. The security has no special covenants. Calculate the security's default risk premium. (Round your percentage answer to 2 decimal places. (e.g., 32.16)) Default risk premium

Problem: 1.7 A particular security's default risk premium is 1 percent. For all securities, the inflation risk premium is 2 percent and the real interest rate is 3 percent. The security's liquidity risk premium is 5 percent and maturity risk premium is 4 percent. The security has no special covenants. What is the security's equilibrium rate of return?

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Calculate the nominal rate of interest for each security. Compare and discuss your findings.

4. A particular security’s equilibrium rate of return is 8 percent. For all securities, the inflation risk premium is 1.75 percent and the real interest rate is 3.5 percent. The security’s liquidity risk premium is .25 percent and maturity risk premium is .85 percent. The security has no special covenants. Calculate the security’s default risk premium.

1.A particular security’s default risk premium is 3 percent. For all securities, the inflation risk premium is 2.65 percent and the real risk-free rate is 1.50 percent. The security’s liquidity risk premium is 0.35 percent and maturity risk premium is 0.95 percent. The security has no special covenants. Calculate the security’s equilibrium rate of return. (Round your answer to 2 decimal places.) 2. A particular security’s default risk premium is 2 percent. For all securities, the inflation risk premium is 1.75 percent and the real risk-free rate is 1.50 percent. The security’s liquidity risk premium is 0.25 percent and maturity risk premium is 0.85 percent. The security has no special covenants. Calculate the security’s equilibrium rate of return. (Round your answer to 2 decimal places.)

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A particular security's default risk premium is 3 percent. For all securities, the inflation risk premium is 2.70 percent and the real risk- free rate is 2.70 percent. The security's liquidity risk premium is 0.30 percent and maturity risk premium is 0.90 percent. The security has no special covenants. Calculate the security's equilibrium rate of return. (Round your answer to 2 decimal places.) Rate of return %

Q24. A particular security's equilibrium rate of return is 10%. For all securities, the inflation premium is 2.00% and the risk free rate is 4.0%. The security's liquidity risk premium is 0.25% and maturity risk premium is 1.00%. The security has no special covenants. Calculate the security's default risk premium.

A particular security's default risk premium is 3.70 percent. For all securities, the inflation risk premium is 2.45 percent and the real interest rate is 3.10 percent. The security's liquidity risk premium is .80 percent and maturity risk premium is .95 percent.The security has no special covenants. What is the security's equilibrium rate of return?

a. Calculate the expected return for each security. b. Calculate the standard deviation for each security

3 Duration is: E Multiple Choice the elasticity of a security's value to small coupon changes. the weighted average time to maturity of the bond's cash flows. the time until the investor recovers the price of the bond in today's dollars. greater than maturity for deep discount bonds and less than maturity for prenum bonds. the second derivative of the bond price formula with respect to the yield to maturity. Q Search 4 R % 5 T 19 144 U 00 S att A

A particular security’s equilibrium rate of return is 8 percent. For all securities, the inflation risk premium is 2.45 percent and the real risk-free rate is 2.0 percent. The security’s liquidity risk premium is 0.75 percent and maturity risk premium is 0.95 percent. The security has no special covenants. Calculate the security’s default risk premium. (Round your answer to 2 decimal places. (e.g., 32.16))   What is the default risk premium   %

A particular security's default risk premium is 1 percent. For all securities, the inflation risk premium is 2 percent and the real interest rate is 3 percent. The security's liquidity risk premium is 5 percent and maturity risk premium is 4 percent. The security has no special covenants. What is the security's equilibrium rate of return?