Homework Answers
Yield on Black Sheep's bond = real risk free rate
+ inflation premium
+ liquidity premium
+ maturity risk premium
+ default risk premium
Substituting values,
7% = 3%
+ 1.75%
+ 0.75%
+ (5 - 1) x 0.1%
+ default risk premium
Hence default risk premium = 1.1%
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1. (True/False. Explain) Bond price approaches Face Value as it moves closer to maturity. 2. Black...
2. Black Sheep Corporation's 5-year bonds yield 7.00%, and 5-year T-bonds yield 5.15%. The real risk-free...
2. Black Sheep Corporation's 5-year bonds yield 7.00%, and 5-year T-bonds yield 5.15%. The real risk-free rate is r* = 3.0%, the inflation premium for 5-year bonds is IP = 1.75%, the liquidity premium for Keys' bonds is LP = 0.75% versus zero for T-bonds, and the maturity risk premium for all bonds is found with the formula MRP = (t-1)x0.1%, where t = number of years to maturity. What is the default risk premium (DRP) on Black Sheep's bonds?
2. Black Sheep Corporation's 5-year bonds yield 7.00%, and 5-year T-bonds yield 5.15%. The real risk-free rate is r...
2. Black Sheep Corporation's 5-year bonds yield 7.00%, and 5-year T-bonds yield 5.15%. The real risk-free rate is r = 3.0%, the inflation premium for 5-year bonds is IP = 1.75%, the liquidity premium for Keys' bonds is LP=0.75% versus zero for T-bonds, and the maturity risk premium for all bonds is found with the formula MRP = (t-1)x0.1%, where t = number of years to maturity. What is the default risk premium (DRP) on Black Sheep's bonds?
Can you please include the formula with the answer as well. Problem 2 (15 points) FIN300...
Can you please include the
formula with the answer as well.
Problem 2 (15 points) FIN300 Corporation's 5-year bonds yield 7.00%, and 5-year T-bonds yield 5.15%. The real risk-free rate is r*-3.0%, the inflation premium for all 5-year bonds is IP 1.75%, the liquidity premium for FIN300's bonds is LP-0.75% versus zero for T-bonds, and the maturity risk premium for all bonds is found with the formula MRP-(-1) x 0.1%, where t number of years to maturity. What is the...
Problem 2: (2 points) Keys Corporation's 5-year bonds yield 6.50%, and 5-year T-notes yield 4.40%. The...
Problem 2: (2 points) Keys Corporation's 5-year bonds yield 6.50%, and 5-year T-notes yield 4.40%. The real risk-free rate is r* = 2.5%, the inflation premium for 5 years bonds is IP = 1.50%, the liquidity premium for Keys' bonds is LP = 0.5% versus zero for T-notes, and the maturity risk premium for all bonds is found with the formula MRP = (t – 1)*0.1%, where t = number of years to maturity. What is the default risk premium...
Suppose the real risk free rate : 4.205. Expected inflation - 1.10 Maturity riak premium, P...
Suppose the real risk free rate : 4.205. Expected inflation - 1.10 Maturity riak premium, P = 0.10(E) where to the years to maturity. Calculate for the return of year Treasury security? a. 7.50 b. 7.80 c. 7.701 13. Pirms five year bonds. yield -6.201; Five year Treasury bonds yield - 4.401. Real risk-free rate, r. - 2.51. Expected inflation for five yar bonds, IP - 1.501. Liquidity premium for AA bond, LP - 0.51 and zero for Treasury bonds....
2.1.40% b. .. 1 1 5. Le Corporation's 5-year bonds yield 6.30%, and 5-year T-bonds yield 4.80%. The real risk-free...
2.1.40% b. .. 1 1 5. Le Corporation's 5-year bonds yield 6.30%, and 5-year T-bonds yield 4.80%. The real risk-free rate is r = 2.7570, the inflation premium for 5-year bonds is IP = 1.65%, the default risk premium for Le's bonds is DRP = 1.20% versus zero for T-bonds, and the maturity risk premium for all bonds is found with the formula MRP = (t - 10.1%, where t =number of years to maturity. What is the liquidity premium...
6. Moore Corporation has 6-year bonds. Inflation premium (IP) on a 6year bond is 1.00%. The...
6. Moore Corporation has 6-year bonds. Inflation premium (IP) on a 6year bond is 1.00%. The real risk-free rate is r* = 2.80%, the default risk premium for Moore's bonds is DRP = 0.85% versus zero for T-bonds, the liquidity premium on Moore's bonds is LP= 1.20%, and the maturity risk premium for all bonds is found with the formula MRP = (t - 1) x 0.1%, where t = number of years to maturity. What is the yield on...
Niendorf Corporation's 5-year bonds yield 6.75%, and 5-year T-bonds yield 4.80%....continues
Niendorf Corporation's 5-year bonds yield 6.75%, and 5-year T-bonds yield 4.80%. The real risk-free rate is r* = 2.75%, the inflation premium for 5-year bonds is IP =1.65%, the default risk premium for Niendorf's bonds is DRP = 1.20% versus zero for T-bonds, and the maturity risk premium for all bonds is found with the formula MRP= (t - 1) ´ 0.1%, where t = number of years to maturity. What is the liquidity premium (LP) on Niendorf's bonds?
Can you please help me solve these problems. The subject is Principles of Finances Chapter 6...
Can you please help me solve these problems. The
subject is Principles of Finances Chapter 6 Interest Rates.
a) THIS IS TRUE b) THIS IS FALSE 2. Johnson Corporation's 5-year bonds yield 6.85%, and 5-year T-bonds yield 4.75%. The real risk-free rate is r* 2.80%, the default risk premium for Johnson's bonds is DRPs 0.85% versus zero for T-bonds, the liquidity premium on Johnson's bonds is LP 1.25%, and the maturity risk premium for all bonds is found with the...
Problem 4 FIN300 Corporation's 10-year bonds yield 8.00%, and 10-year T-bonds yield 6%. The real risk-free...
Problem 4 FIN300 Corporation's 10-year bonds yield 8.00%, and 10-year T-bonds yield 6%. The real risk-free rate is r* 3.0%, the inflation premium for 5-year bonds is IP = 1.95%, the liquidity premium for FIN300's bonds is LP = 1% versus zero for T-bonds, and the maturity risk premium for all bonds is found with the formula MRP (-1) x 0.07%, where t-number of years to maturity. What is the default risk premium (DRP) on FIN300's bonds?
2. Black Sheep Corporation's 5-year bonds yield 7.00%, and 5-year T-bonds yield 5.15%. The real risk-free rate is r* = 3.0%, the inflation premium for 5-year bonds is IP = 1.75%, the liquidity premium for Keys' bonds is LP = 0.75% versus zero for T-bonds, and the maturity risk premium for all bonds is found with the formula MRP = (t-1)x0.1%, where t = number of years to maturity. What is the default risk premium (DRP) on Black Sheep's bonds?
2. Black Sheep Corporation's 5-year bonds yield 7.00%, and 5-year T-bonds yield 5.15%. The real risk-free rate is r = 3.0%, the inflation premium for 5-year bonds is IP = 1.75%, the liquidity premium for Keys' bonds is LP=0.75% versus zero for T-bonds, and the maturity risk premium for all bonds is found with the formula MRP = (t-1)x0.1%, where t = number of years to maturity. What is the default risk premium (DRP) on Black Sheep's bonds?
Can you please include the
formula with the answer as well.
Problem 2 (15 points) FIN300 Corporation's 5-year bonds yield 7.00%, and 5-year T-bonds yield 5.15%. The real risk-free rate is r*-3.0%, the inflation premium for all 5-year bonds is IP 1.75%, the liquidity premium for FIN300's bonds is LP-0.75% versus zero for T-bonds, and the maturity risk premium for all bonds is found with the formula MRP-(-1) x 0.1%, where t number of years to maturity. What is the...
Problem 2: (2 points) Keys Corporation's 5-year bonds yield 6.50%, and 5-year T-notes yield 4.40%. The real risk-free rate is r* = 2.5%, the inflation premium for 5 years bonds is IP = 1.50%, the liquidity premium for Keys' bonds is LP = 0.5% versus zero for T-notes, and the maturity risk premium for all bonds is found with the formula MRP = (t – 1)*0.1%, where t = number of years to maturity. What is the default risk premium...
Suppose the real risk free rate : 4.205. Expected inflation - 1.10 Maturity riak premium, P = 0.10(E) where to the years to maturity. Calculate for the return of year Treasury security? a. 7.50 b. 7.80 c. 7.701 13. Pirms five year bonds. yield -6.201; Five year Treasury bonds yield - 4.401. Real risk-free rate, r. - 2.51. Expected inflation for five yar bonds, IP - 1.501. Liquidity premium for AA bond, LP - 0.51 and zero for Treasury bonds....
2.1.40% b. .. 1 1 5. Le Corporation's 5-year bonds yield 6.30%, and 5-year T-bonds yield 4.80%. The real risk-free rate is r = 2.7570, the inflation premium for 5-year bonds is IP = 1.65%, the default risk premium for Le's bonds is DRP = 1.20% versus zero for T-bonds, and the maturity risk premium for all bonds is found with the formula MRP = (t - 10.1%, where t =number of years to maturity. What is the liquidity premium...
6. Moore Corporation has 6-year bonds. Inflation premium (IP) on a 6year bond is 1.00%. The real risk-free rate is r* = 2.80%, the default risk premium for Moore's bonds is DRP = 0.85% versus zero for T-bonds, the liquidity premium on Moore's bonds is LP= 1.20%, and the maturity risk premium for all bonds is found with the formula MRP = (t - 1) x 0.1%, where t = number of years to maturity. What is the yield on...
Can you please help me solve these problems. The
subject is Principles of Finances Chapter 6 Interest Rates.
a) THIS IS TRUE b) THIS IS FALSE 2. Johnson Corporation's 5-year bonds yield 6.85%, and 5-year T-bonds yield 4.75%. The real risk-free rate is r* 2.80%, the default risk premium for Johnson's bonds is DRPs 0.85% versus zero for T-bonds, the liquidity premium on Johnson's bonds is LP 1.25%, and the maturity risk premium for all bonds is found with the...
Problem 4 FIN300 Corporation's 10-year bonds yield 8.00%, and 10-year T-bonds yield 6%. The real risk-free rate is r* 3.0%, the inflation premium for 5-year bonds is IP = 1.95%, the liquidity premium for FIN300's bonds is LP = 1% versus zero for T-bonds, and the maturity risk premium for all bonds is found with the formula MRP (-1) x 0.07%, where t-number of years to maturity. What is the default risk premium (DRP) on FIN300's bonds?
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