Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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You observe that the current interest rate on short-term U.S. Treasury bills is 4.86 percent. You also read in the newspaper that the
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- What current rate environment is the US currently in by historical standards? (LOW, HIGH, AVERAGE) What are the expectations for rates in the US over the next year? How will this impact businesses borrowing money (debt)? What do you observe in day-to-day life regarding current inflation?arrow_forwardPlease see attachedarrow_forwardSuppose that the one-year U.S. interest rate is 8% and the equivalent one-year India interest rate is 12%. According to approximate covered interest parity, is there a forward premium, forward discount or forward flat on the dollar?arrow_forward
- The annual inflation rate is expected to be 4.78% and the nominal (annual) interest rate is 5.75%. What is the real interest rate?arrow_forwardDeriving Forecasts of the Future Spot Rate As of today, assume the following information is available: U.S. MEXICO Real rate of interest required by investors 2% 2% Nominal interest rate 11% 15% Spot rate — $.20 One-year forward rate — $.19 Use the forward rate to forecast the percentage change in the Mexican peso over the next year. Use the differential in expected inflation to forecast the percentage change in the Mexican peso over the next year. Use the spot rate to forecast the percentage change in the Mexican peso over the next year.arrow_forwardAssume that the Australian dollar's spot rate is $1.25 and that the Australian and U.S 1 year interest rates are initially 8%. Then assume that the Australian 1-year interest rate increases by 5% points, while the U.S 1 year's interest rate remains unchanged. Using this information and the international fisher effect (IFE) theory, forecast the spot rate for 1 year ahead. (a) $2.33 (b) $1.19 (c) $4.67 (d) $6.78arrow_forward
- . Treasury notes and bonds. Use the information in the following table: What is the price in dollars of the February 2000 Treasury note with semiannual payment if its par value is $100,000? What is the current yield of this note? What is the price in dollars of the February 2000 Treasury note? (Round to the nearest cent.) Data table (Click on the following icon in order to copy its contents into a spreadsheet.) Today is February 15, 2008 Type Issue Date Price Note Feb 2000 Coupon Rate 7.25% Maturity Date 2-15-2010 YTM Current Yield Rating 4.324% AAAarrow_forwardSuppose that the real interest rate in Japan and the U.S. is 2.00%. Furthermore, assume that the nominal (1-year) interest rate in Japan is 11.00% while the nominal interest rate over the same time period in the United States is 8.00%. According to the international Fisher effect theory, the expected inflation rate in Japan is % is % while the expected inflation rate in the U.S.arrow_forwardYou observe that the inflation rate in the USA is 2 percent per year and that T-bills curently yeild 2.5 percent annually. Use the approximate international fisher effect equation in your calculations. a. What do you estimate the inflation rate to be in Austraila, if short-term Austrailian government securities yeild 5 percent per year? Do not round intermediate calculations and enter your answer as a percent rounded to 1 decimal place e.g. 32.1. b. What do you estimate the inflation rate to be in Canada, if short-term canadian government securities yeild 8 percent per year? Do not round intermediate calculations as mentioned above. C. What do you estimate the inflation rate to be in Taiwaan , if short-term government securities yeild 10 percent per year?arrow_forward
- The interest rate on Indian government securities with one-year maturity is 8%, and the expected inflation rate for the coming year is 7%. The interest rate on US government securities with one-year maturity is 0.18% and the expected rate of inflation is 1.5%. The current spot exchange rate for Indian Rupee is $1=R56. Forecast the spot exchange rate one year from today. Explain the logic of your answer.arrow_forwardurgent...arrow_forwardAssume that interest rate parity holds. The U.S. four-year interest rate is 5% annualized, and the Indian four-year interest rate is 8% annualized. Today's spot rate of the Indian rupee is $.14. What is the approximate four-year forecast of the rupee's spot rate if the four-year forward rate is used as a forecast? A. $.174. B. $.262. C. $.125. D. $.226. E. $.115.arrow_forward
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