okBased on economists' forecasts and analysis, 1-year Treasury bill rates and liquidity premiums for the next four years are expected tobe 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 entered

Long term rates:Long-term rates denote the prevailing interest percentages on financial instruments…

Answered: Based on economists' forecasts and…

Based on economists' forecasts and analysis, 1-year Treasury bill rates and liquidity premiums. be as follows: R1 = 1.00% = 2.15% E(21) E(3r1) 2.25% E(41) = 2.55% 42 = L3 = L4= 0.05% 0.10% 0.12% 4

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Concept explainers

Treasury Market

On-the-run securities are the most recently issued securities in the market depth and are therefore traded at some premium. The off-the-run securities are the ones issued just before the most recent ones. The on-the-run securities have a lower yield to the investor than the off-the-run securities.

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ok
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 entered

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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 E(2r1) E(3r1) E(4r1) 1.20% 2.35% L2 = 0.09% 2.45% L3 = 0.12% 2.75% L4= 0.14% 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 0.85% R₁ = E(2r1) = 2.00% E(3r1) = 2.10% E(41) = 2.40% 42 = 43 = 0.08% 0.10% L4 44 = 0.12% 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). Years 1 2 3 4 Current (Long-term) Rates % % % %
Liquidity Premium Hypothesis Based on economists' forecasts and analysis, one-year Treasury bill rates and liquidity premiums for the next four years are expected to be as follows: R1 = 6.05% E(r2) = 7.15% L2 = .85% E(r3) = 7.35% L3 = .88% E(r4) = 7.55% L4 = .90% Using the liquidity premium hypothesis, what is the current rate on a four-year Treasury security?
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 = 0.80% = 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 % % % %
ok t 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 = 0.65% E(201) = 1.80 % L2 = 0.04% E(301) = 1.98% L3 = 0.08% E(471) = 2.20% L4 = 0.10% Using the liquidity premium theory, determine the current (long-term) rates. (Do not round intermediate calculations. Round your answers to 2 decimal places.) Years 1 2 3 4 Current (Long- Term) Rates % % % %
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 %
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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: 0.80% = 1.95% R1 E(201) E(371) = $2.05% E(471) 2.35% L2= 0.07% L3= 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.) Years 1 2 3 4 Current (Long-term) Rates % % % %
Based on economists' forecasts and analysis, one-year Treasury bill rates and liquidity premiums for the next four years are expected to be as follows: 1R1 = E(2r1) = E(31) = 1.01% E(4r1) = 1.31% 0.50% 0.91% L2 = 0.06% L3 = 0.17% L4 = 0.19% %3D %3D Calculate the yield to maturity for four years
Give typing answer with explanation and conclusion to all parts The real risk-free rate, r*, is 2%, and inflation is expected to be 3.0% this year, 3.5% for the next two years; 4.0% the following year, and then 5.0% thereafter. The maturity risk premium is estimated to be 0.05%(t1), where t = number of years to maturity. Liquidity risk premium is 0.7%, default risk premium is 1%. - What are the Treasury yield for 3 years, and 6 years bonds? - What are the Corporate yield for 3 years, and 6 years bonds?
Based on economists' forecasts and analysis, one-year Treasury bill rates and liquidity premiums for the next four years are expected to be as follows: Using the liquidity premium theory, what is the current rate on a four- year Treasury security? R1 = 6.65% E(r₂) 7.75% L2 = 0.10% E(r3) = 7.85% L3 0.20% E(r4) = 8.15% L4 = 0.25% Multiple Choice O 7.736 percent 7.600 percent 7.738 percent 8.400 percent
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