Suppose that the nine-month SOFR interest rate is 8% per annum and the six-month SOFR interest rate is 7.5% per annum. Estimate the three-month SOFR futures price quote for a contract maturing in six months.
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Suppose that the nine-month SOFR interest rate is 8% per annum and the six-month SOFR
interest rate is 7.5% per annum. Estimate the three-month SOFR futures price quote for a
contract maturing in six months.
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- The annual payment of a 10-year fixed-income security is $50. The payments are made at the end of each year. The market-required rate of return is 10%. What is the current price of the securities?A two year treasury security currently earns 1.77%. Over the next two years, the real risk free rate is expected to be 1.30% per year and the inflation premium is expected to be 0.30% per year. Calculate the maturity risk premium on the two-year treasury security.A 2-year Treasury security currently earns 1.97 percent. Over the next two years, the real risk-free rate is expected to be 1.00 percent per year and the Inflation premium is expected to be 0.60 percent per year. Calculate the maturity risk premium on the 2-year Treasury security. (Round your answer to 2 decimal places.) 1% Maturity risk premium
- A 2-year Treasury security currently earns 1.94 percent. Over the next two years, the real risk-free rate is expected to be 1.00 percent per year and the inflation premium is expected to be 0.50 percent per year. Calculate the maturity risk premium on the 2-year Treasury security.A 2-year Treasury security currently earns 1.77 percent. Over the next two years, the real risk-free rate is expected to be 1.30 percent per year and the inflation premium is expected to be 0.30 percent per year. Calculate the maturity risk premium on the 2-year Treasury security. (Round your answer to 2 decimal places.)Calculate the price of an option that caps the three-month rate, starting in 15 months' time, at 13% (quoted with quarterly compounding) on a principal amount of $1,000. The forward interest rate for the period in question is 12% per annum (quoted with quarterly compounding), the 18-month risk-free interest rate (continuously compounded) is 11.5% per annum, and the volatility of the forward rate is 12% per annum.
- Suppose the spot rates for the next three years are 4.2%, 4.6% and 4.8% respectively. The one year forward rates are 4.2%, 5.0015% and 5.2012%, respectively as well. Using a value of 10% for the volatility of the one year forward rate, construct a three-year binomial interest rate tree with one year forward rates.Assume that the real interest rate is 2% per year, the default risk premium is 3%, the liquidity premium is 1%, and the maturity risk premium is 2%. Additionally, expected inflation is 2% next year, 5% the year after, and 3% from then on. What is the nominal interest rate over a 10-year period?Assume that as of today, the annualized interest rate on a three-year security is 3 percent, while the annualized interest rate on a two-year security is 2.15 percent. Use this information to estimate the one-year forward rate two years from now.
- Suppose the 1-year and 2-year OIS rates are 2% and 4%, respectively. Consider an OISswap with two years to maturity where you receive 3% and pay the floating reference ratewith principal 1 million. If the payments are made annually with annual compounding, what is the value of the swapa) Suppose that the current one-year spot rate and expected one-year T-bill rates over the following three years (i.e., years 2, and 3 respectively) are as follows: 1R1 = 3.1%, E(201) = 4.20%, E(3r₁) = 6.6%. Using the unbiased expectation theory, calculate the current long-term rates for one- two and three-year-maturity Treasury securities and plot the current yield curve. Please show each step of your calculation. b) What are the sources of funding for commercial banks? Please also classify the sources of funding and briefly describe each category. c) The unbiased expectation theory and liquidity premium theory are two important theories to explain the shape of yield curve. Discuss and compare the two theories.The 9-month LIBOR rate is 5%, and the 6-month LIBOR rate is 4%, on the basis of continuous compounding and 365 days a year. The 3-month Eurodollar futures price quote for a contract with a delivery date in 6 months should be: a. 93.0000 b. 92.9384 c. 93.0351