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Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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
Transcribed Image Text:II. Show your solution
1. For each of the following Treasury Bills, calculate the discount basis yield
and the investment yield:
Investment
T-Bill
Maturity
Price per $100
Discount Yield
Yield
A
128-day
97.9323
В
91-day
98.7312
C
28-day
96.8931
D
182-day
99.1236
E
91-day
95.7821
2. Suppose the discount yield on a 128-day T-bill is 5%. What is its discount-
basis yield?
3. Suppose the investment yield on a 91-day T-bill is 3%. What is its discount-
basis yield?
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- 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 = 0.55% R1 E(21) = 1.70% = 42 = 0.08% E(31) 1.80% 43 = L4= 0.12% 0.14% = E(41) 2.10% Using the liquidity premium theory, determine the current (long-term) rates. Note: Do not round intermediate calculations. Round your percentage answers to 2 decimal places (i.e., 0.1234 should be entered as 12.34). Current (Long-term) Rates Years 1 % 2 % 3 % 4 5 %arrow_forwardWhat should be the value of a Bankers' Acceptance with a $100,000 face value and 79 days until maturity quoted on a discount basis yielding 1.8935% with the current inflation rate of 2.2972? Consider the same question above assuming a $250,000 face value and 279 days until maturity quoted on a discount basis yielding .8935% with the current inflation rate of 1.467?arrow_forwardD3) Finance The current SOFRs for 3-month, 6-month and 9-month are 10.96%, 11.25% and 11.45%, respectively. What is annualized swap rate for the 9-month interest rate swap? %arrow_forward
- What is the real interest rate given a nominal rate of 8.7% and an inflation rate of 1.5%? A. 11.3% B. 8.5% C. 7.1% D. 9.9%arrow_forwardBased 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 = 0.80% = 1.95% E(201) E(3r1) E(41) = 2.05% = 2.35% Years 1 2 3 4 42= 0.07% 43= 0.11% 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.) Current (Long-term) Rates % % % %arrow_forwardok 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 = 1.00% = 2.15% 2.25% = 2.55% E(21) E(31) = E(471) 42 = L3 = L4 = Using the liquidity premium theory, determine the current (long-term) rates. 0.05% 0.10% 0.12% nel plecor (in 01234 should be enteredarrow_forward
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