Question 51 ptsThe real risk-free rate is 2.5 percent. Inflation is expected tobe 2.5 percent this year, 4 percent next year, and 5 percentthereafter. The maturity risk premium is estimated to be0.09x (t-1)%, where t is the number of years to maturity.What is the yield on a 7-year Treasury note?8.04%O 7.00%0.63%O 5.54%O 7.54%

To compute the yield on a 7-year Treasury note, we need to consider several components:Real…

Answered: Question 5 1 pts The real risk-free…

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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Problem 11 Intro You have $22,000 to invest. The spot rate for the euro is $1.16 per euro, while the 180-day forward rate is $1.17 per euro. The six-monthly interest rate in the euro area is 6% and in the U.S. it is 3%. Attempt 5/10 for 8 pts. Part 1 What is your risk-free rate of return (yield) from exploiting the higher interest rate in the euro area? Submit
Problem 6-23 Real Returns (LO3) Suppose that you buy a TIPS (inflation-indexed) bond with a 2-year maturity and a (real) coupon of 4.4% paid annually. If you buy the bond at its face value of $1,000, and the inflation rate is 8.60% in each year. a. What will be your cash flow in year 1? Note: Do not round intermediate calculations. Round your answer to 2 decimal places. Cash flow b. What will be your cash flow in year 2? Note: Do not round intermediate calculations. Round your answer to 2 decimal places. Cash flow c. What will be your real rate of return over the two-year period? Note: Enter your answer as a percent rounded to 1 decimal place.
Question 8 You owe $40,000 in 2 years' time. Annualised yields are 7% at all horizons. There is a 1-year zero-coupon bond, and a 5-year annuity paying $4 per year. To the nearest cent, how much should you invest in the 1-year bond and 5-year annuity to immunise yourself against interest rate risk?
Q. 16 Consider a security with a duration of 7 years. The current interest rate level is 10% p.a. How does the price of the security change if interest rates increase by 1.5% (round your answer to two decimals) ? Choose the correct option The price of the security will decrease by 1.5%. The price of the security will increase by 1.5%. The price of the security will decrease by 8.5%. The price of the security will increase by 9.55%. The price of the security will decrease by 9.55%.
Ins 8. Suppose that today's interest rate on 1-year bonds is 4% (i10 year bonds next year, in two years, and in three years are expected to be 5%, 6%, and 7%, respectively. 0.04). Interest rates on 1- ha a. According to the Expectations Theory of Term Structure, what are the equilibrium interest rates today for otherwise comparable 2-year, 3-year, and 4-year bonds? b. Draw the yield curve for that case. or
QUESTION THREE A K100, 000 Treasury bill currently sells at 95% of its face value and is 65 days from maturity. Calculate the following for the Treasury bill: the discount yield. the investment yield.
Question 4 Suppose that the current price of USD/TL rate is 7.18. AL Borsa Istanbul there is USD futures contract with maturity June 30th. 2021. Suppose the discount rate fram today to June is 0.95. Suppose that the contractis traded at fair price. Each contract is for 1000 USD and needs 400 TL initial margin and 300 TL maintenance margin in the account. Suppose expecting USD rate will rise you bought 5 long contracts. (Answer the following to 2 decimal digits.) What is the initial price of the future contract - USD/TRY. What is the initial amount of margin account needed- TL If the USD rate falls to 7.14 next month and the discount factor becomes 0.96 what is your profit/loss: TL (write negative number for loss) TL What is the remaining amount on margin account? will there be a margin call? ves/No)
Please solve these 2 problems
te.8
Question 3 A bond has a face value or par value of $1000 and will mature at par in 10 years. The coupon rate is 10% compounded semi-annually. The yield rate is 8% compounded semi-annually. Find the excess of the semi-annual coupon payment over the required semi-annual yield. O a $10 Ob $100 Ос $20 Od $80
QUESTION 15 Suppose that all investors expect that the interest rates for the 4 years will be as follows. What is the price of a 3-year zero coupon bond with par-$1,000? Year 1-Year Forward rate 4.6% 2 4.9% 3 5.2% 4 5.5% O a. $1,000.00 Ob. $866.32 Oc. $858.92 Od. $821.15

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