Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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- consider a 30 - year U.S. corporate bond with a 10% coupon rate. The current interest rate is 7 percent. Find the holding period return, if the interest rate rises by 10 basis points after one period.arrow_forwardA ten-year floating-rate note (FRN) has coupons referenced to 3-month pound LIBOR, and pays coupon interest quarterly. Assume that the current 3-month LIBOR is 4 percent. If the risk premium above LIBOR that the issuer must pay is 12.5 basis points, the next period's coupon payment on a £1,000 face value FRN will be Group of answer choices £31.25. £82.50. £165.00. £10.31.arrow_forwardSuppose that 6 - month, 12-month, 18 - month, 24 month, and 30 - month zero rates are 4%, 4.2%, 4.4%, 4.6%, and 4.6% per annum with continuous compounding respectively. Estimate the cash price of a bond with a face value of 100 that will mature in 30 months and pays a coupon of 6% per annum semiannually.arrow_forward
- A security pays $55 in one year and $133.10 in three years. Present value of this security is $150. The relevant interest rate is %.arrow_forwardInterest rates on 1-year, 2-year, and 3-year Treasury bills are 5%, 6%, and 7%, respectively. Assume that the pure expectations theory holds and that the market is in equilibrium. Which of the following statements is most correct? Group of answer choices The maturity risk premium is positive. Interest rates are expected to rise over the next two years. The market expects one-year rates to be 5.5% one year from today. Answers a, b, and c are all correct. Only answers b and c are correct.arrow_forwardSuppose that the current one-year zero-coupon rate is 2.5% and that the expected one-year rate during each of the subsequent four years is 2.0%, 2.5%, 3.0%, and 3.5%. Under the expectations theory, what is the current 5-year zero-coupon interest rate? Enter the answer in percentage points; for example, if the answer is 5.25%, enter 5.25 rather than .0525.arrow_forward
- The term structure of interest rates is as follows: Maturity Spot Rate / 14% 212%/. What is the forward rate for one year, one year from now (f 1.1)? 2. If the forward rate for two years, one year from now (12. 1) is equal to 9%, then what is. the spot rate with maturity 3 years (13)?arrow_forwardIf the rate of inflation is 5.4%, what nominal interest rate is necessary for you to earn a 3% real interest rate on your investment?(Note: Be careful not to round any intermediate steps less than six decimal places.) The nominal interest rate is_______________ (Round to two decimal places.)arrow_forwardThe real risk-free rate is 2.75%. Inflation is expected to be 3.75% this year, 4.25% next year, and 2.5% thereafter. The maturity risk premium is estimated to be 0.05 x (t-1) %, where t- number of years to maturity. What is the yield on a 7-year Treasury note? Do not round intermediate calculations. Round your answer to two decimal places. %arrow_forward
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