Consider the following US treasury rate table expressed in percentage. Maturity Yield Last Last Yesterday R(0,t) Week Month 6 Month 2.65 2.35 1.85 1.55 1 Year 2.75 2.70 2.20 1.90 2 Year 3.60 2.90 2.40 2.10 3 Year 4.00 4.65 4.15 3.85 5 Year 4.80 4.70 2.20 3.90 10 Year 5.00 4.90 4.40 4.10 30 Year 5.50 5.30 4.80 4.50 The forward rate F(2,1) is the rate that applies to borrowing or lending starting in 2 years from today for an additional year. F(2,1) today is equal to: Answer in percentage with two digits decimal accuracy. Example 10.34

Consider the following US treasury rate table expressed in percentage. Maturity Yield Last Last Yesterday R(0,t) Week Month 6 Month 2.65 2.35 1.85 1.55 1 Year 2.75 2.70 2.20 1.90 2 Year 3.60 2.90 2.40 2.10 3 Year 4.00 4.65 4.15 3.85 5 Year 4.80 4.70 2.20 3.90 10 Year 5.00 4.90 4.40 4.10 30 Year 5.50 5.30 4.80 4.50 The forward rate F(2,1) is the rate that applies to borrowing or lending starting in 2 years from today for an additional year. F(2,1) today is equal to: Answer in percentage with two digits decimal accuracy. Example 10.34

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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15
Determinant of Interest Rates The real risk-free rate of interest is 4%. Inflation is expected to be 1% this year and 5% during each of the next 2 years. Assume that the maturity risk premium is zero. What is the yield on 2-year Treasury securities? Round your answer to two decimal places. % What is the yield on 3-year Treasury securities? Round your answer to two decimal places.
Assume that the expected rates of inflation over the next 5 years are 9 percent, 7 percent, 10 percent, 8 percent, and 6 percent, respectively. What is the average expected inflation rate over this 5-year period? Group of answer choices 9% 7% %5 8%
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%
Maturity Periods Years Yield 1 year 1.00 5.37% 2 years 2.00 5.47% 3 years 3.00 5.65% 4 years 4.00 5.71% 5 years 5.00 5.64% 10 years 10.00 5.75% 20 years 20.00 6.33% 30 years 30.00 5.94%
Complete the following using present value. (Use the Table provided.) (Do not round intermediate calculations. Round the "Rate used" to the nearest tenth percent. Round the "PV factor" to 4 decimal places and final answer to the nearest cent.) Amount desired at end of period 6,600 Length of time 10 years Rate 2% Compounded semiannually On PV Table 12.3 Period used 120 Rate used 0.2 % PV factor used 0.2400 $ PV of amount desired at end of period 1,584.08
14. Suppose that the current three-year rate (three-year spot rate) and expected one-year T- bill rates over the following years are as follows: 1R3 = 12%, E(201) = 8%, E( 31 ) = 10% What should be the current spot rate for one-year treasury bill? 9.00% 5.59% 18.26% 18.80% 9.99%
Find the future value. (Use the Table 12.1.) (Do not round intermediate calculations. Round the "FV factor" to 4 decimal places and final answer to the nearest cent.) $ Present value 11,129.37 Length of time 5 years Rate 12% Compounded Quarterly On FV Table 12.1 Period used 20 Rate used 3% FV factor used Future value
2. What does the following yield curve predict? Treasury yield curve for July 31, 2000. Maturity Yield (%) 1 month 3 months 6.20 6 months 6.35 1 year 2 years 6.30 З years 6.30 5 years 6.15 7 years 10 years 6.03 30 years 5.78
For each of the following cases, indicate (a) what interest rate columns and (b) what number of periods you would refer to in looking up the present value factor. (1) In Table 3 (present value of 1): Number of Discounts Annual Rate Years Involved per Year Case A 9% 7 Case B 10% 8 Annually Semiannually Case C 8% 8 Semiannually Case A Case B Case C (a) (b) % periods % periods % periods (2) In Table 4 (present value of an annuity of 1): Annual Rate Number of Years Involved Number of Payments Involved Frequency of Payments Case A 8% 15 15 Annually Case B 8% 4 4 Annually Case C 12% 8 16 Semiannually (a) Case A % Case B % (b) periods periods Case C % periods
Consider the following table for a seven-year period: Year 1 2 3 4 5 6 7 U.S. Treasury Bills 3.45% 3.30 4.20 4.62 2.42 1.30 1.03 Returns Average real return Inflation -1.15% -2.29 -1.19 0.61 -6.43 -9.35 -1.30 What was the average real return for Treasury bills for this time period? Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16. %
A 5.05% Coupon Treasury Inflation Protection Security has an original reference CPI of 295.32. If the current CPI is 302.33, what is the current coupon interest payment? (Assume semiannual interest payments and a par value of $1,000) $25.25 $23.74 $25.85 ○ $51.70

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