Using the expectations hypothesis theory for the term structure of interest rates, determine the expected return for securities with maturities of two, three, and four years based on the following data. (Input your answers as a percent rounded to 2 decimal places.) 1-year 7-bill at beginning of year 1 1-year T-bill at beginning of year 2 1-year T-bill at beginning of year 3 1-year T-bill at beginning of year 4 2-year security 3-year security 4-year security Expected Return % % % Interest Rate 64 98 7% 10%
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- Using the expectations hypothesis theory for the term structure of interest rates, determine the expected return for securities with maturities of two, three, and four years based on the following data. (Input your answers as a percent rounded to 2 decimal places.) 1-year T-bill at beginning of year 11 1-year T-bill at beginning of year 2 1-year T-bill at beginning of year 3 1-year T-bill at beginning of year 4 2-year security 3 year security 4-year security Expected Return % % % ***** Interest Rate 5% 7% 9% 11%Using the expectations hypothesis theory for the term structure of interest rates, determine the expected return for securities with maturities of two, three, and four years based on the following data. (Input your answers as a percent rounded to 2 decimal places.) 1-year T-bill at beginning of year 11 1-year T-bill at beginning of year 2 1-year T-bil at beginning of year 3 1-year T-bill at beginning of year 4 2-year security 3 year security 4-year security Expected Return % % % ***** Interest Rate 5% 7% 9% 11%Using the expectations hypothesis theory for the term structure of interest rates, determine the expected return for securities with maturities of two, three, and four years based on the following data. (Input your answers as a percent rounded to 2 decimal places.) Interest Rate 1-year T-bill at beginning of year 1 1-year T-bill at beginning of year 2 1-year T-bill at beginning of year 3 1-year T-bill at beginning of year 4 2% 5% 4% 7% Expected Return 0.00 % 2-year security 3-year security % 4-year 2 decimal places required.
- Using the expectations hypothesis theory for the term structure of interest rates, determine the expected return for securities with maturities of two, three, and four years based on the following data. Note: Input your answers as a percent rounded to 2 decimal places. Interest Rate 1-year T-bill at beginning of year 1 6% 1-year T-bill at beginning of year 2 9% 1-year T-bill at beginning of year 3 10% 1-year T-bill at beginning of year 4 12% Expected Return 2 year security % 3 year security % 4 year security %Using the expectations hypothesis theory for the term structure of interest rates, determine the expected return for securities with maturities of two, three, and four years based on the following data. (Input your answers as a percent rounded to 2 decimal places. Do not round intermediate calculations.) 1-year T-bill at beginning of year 1 1-year T-bill at beginning of year 2 1-year T-bill at beginning of year 3 1-year T-bill at beginning of year 4 5% 8% 7% 10% ง 2-year security 3-year security 4-year security Expected Return % % %Using the expectations hypothesis theory for the term structure of interest rates, determine the expected return for securities with maturities of two, three, and four years based on the following data. (Input your answers as a percent rounded to 2 decimal places. Do not round intermediate calculations.) 1-year T-bill at beginning of year 1 1-year T-bill at beginning of year 2 1-year T-bill at beginning of year 3 1-year T-bill at beginning of year 4 2-year security 3-year security 4-year security Expected Return 6.11 % 7.10 % 5% 795 4
- Deriving Current Interest Rates. Assume that interest rates for one-year securities are expected to be 0.05 today, 0.02 one year from now and 0.03 two years from now. Using only the pure expectations theory, what are the current interest rates on three-year securities. Enter the answer as a decimal using 4 decimals (e.g. 0.1234).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: 1 R3 = 12% E(271) = 8% E(371) = 10% Using the unbiased expectations theory, calculate the current rates for one- and two-year maturity Treasury securities, i.e., 1 R₁ and 1 R2. Convert your answers to percentages. 1R1 = 17.39%; 1R2 = 12.56% O 1R1 = 20.73; 1R2 = 11.49% O 1R1 = 18.26%; 1R2 = 13.01% O 1R1 = 19.52; 1R2 = 14.74%Maharshi is attempting to find the nominal rate of interest for each of two securities A and B issued by different firms at the same point in time. He has gathered the following data: Characteristics Time to Maturity Inflation expectation premium Secuity A Security B 15 Years 7% 3 Years 9% Risk Premium For: 1% Liquidity Risk Default Risk Maturity Risk Other Risk 1% 2% 1.50% 1% 0.50% 0.50% 1.50% a. If the real rate of interest is 2%, find the risk free rate of interest applicable to each security. b. Find the total risk premium attributable to each securitys. c Calculate the nominal rate of interest for each security?
- Maharshi is attempting to find the nominal rate of interest for each of two securities A and B issued by different firms at the same point in He has gathered the following data: Characteristics Secuity A Security B Time to Maturity 3 Years 15 Years Inflation expectation premium 9% 7% Risk Premium For: Liquidity Risk 1% 1% Default Risk 1% 2% Maturity Risk 0.50% 1.50% Other Risk 0.50% 1.50% If the real rate of interest is 2%, find the risk free rate of interest applicable to each Find the total risk premium attributable to each Calculate the nominal rate of interest for each security?Consider the following table of rates on treasury securities. Assume that the pure expectations theory holds and estimate the future 3-year rate, 2 years from now, upto the fourth decimal. Maturity Yield in Years 1 5.9 2 6.1 3 6.3 4 6.4 5 6.5 6.9675% 6.7675% 6.6335% 6.9335% 6.8007%Consider the following maturity / yield to maturity for all treasuries. Interest compounds semiannually. Term to Maturity (years) Yield to Maturity or Coupon Rate 0.5 4.50% 1.0 5.00% 1.5 5.50% 2.0 6.00% 2.5 6.50% a) Which, if any, of these securities are zero coupon securities b) Why isn’t the 1.5 year spot rate equal to 5.5% c) Calculate the 1.5 year spot rate.