A 10 year Treasury Note currently pays a nominal interest rate of 2.25%. 10 year corporate investment...
A 10 year Treasury Note currently pays a nominal interest rate of 2.25%. 10 year corporate investment grade bonds are currently paying a nominal interest rate of 4.5%. What is the risk premium for corporate bonds?
Homework Answers
Risk premium = Yield on a risky security - Yield on a risk free security
Risk premium = 4.5% - 2.25%
Risk premium = 2.25%
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A 10 year Treasury Note currently pays a nominal interest rate
of 2.25%. 10 year corporate investment...
1. A 10 year Treasury Note currently pays a nominal interest rate of 2.25%. 10 year corporate...
1. A 10 year Treasury Note currently pays a nominal interest rate of 2.25%. 10 year corporate investment grade bonds are currently paying a nominal interest rate of 4.5%. What is the risk premium for corporate bonds? 2. An insurance agent is trying to sell you an immediate-retirement annuity (big surprise), which for a single amount paid today will provide you with $12,000 at the end of each year for the next 25 years. You currently earn 9% on low risk...
A one-year U.S. Treasury security has a nominal interest rate of 2.25 percent. If the expected...
A one-year U.S. Treasury security has a nominal interest rate of 2.25 percent. If the expected real rate of interest is 1.5 percent, what is the expected annual inflation rate?
(Interest rate determination) If the 10-year Treasury bond rate is 6.4%, the inflation premium is 1.9%,...
(Interest rate determination) If the 10-year Treasury bond rate is 6.4%, the inflation premium is 1.9%, and the maturity-risk premium on 10-year Treasury bonds is 0.2%, assuming that there is no liquidity-risk premium on these bonds, what is the real risk-free interest rate? The real risk-free interest rate is _____%. (Round to one decimal place.)
1) Assume that a 3-year treasury security yields 4.10%. Also assume that the real risk-free rate...
1) Assume that a 3-year treasury security yields 4.10%. Also assume that the real risk-free rate (r*) is 0.75% and inflation is expected to be 2.25% annually for the next 3 years. In addition to inflation, the nominal insterest rate includes a maturity risk premium (MRP) that reflects interest rate risk. What is the maturity risk premium for the 3-year security? Round answer to two decimal places. 2) a treasury bond that matures in 10 years has a yield of...
9.A 2-year Treasury security currently earns 4.63percent. Over the next 2 years, the real interest rate...
9.A 2-year Treasury security currently earns 4.63percent. Over the next 2 years, the real interest rate is expected to be 2.15percentper year and the inflation premium is expected to be 1.75percentper year. If you make the usual assumption that there is no liquidity risk on a Treasury security, what is the maturity risk premium on the 2-year Treasury security? A. morethan 2.00 percent B. more than 1.65 percentbut lessthan 2.00 percent C. more than 1.20 percentbut lessthan 1.65 percent D....
18. Problem 6.17 INTEREST RATE PREMIUMS A 5-year Treasury bond has a 3.35% yield. A 10-year Treasury...
18. Problem 6.17 INTEREST RATE PREMIUMS A 5-year Treasury bond has a 3.35% yield. A 10-year Treasury bond yields 6.25%, and a 10-year corporate bond yields 9.55%. The market expects that inflation will average 3.15% over the next 10 years (IP10 = 3.15%). Assume that there is no maturity risk premium (MRP = 0) and that the annual real risk-free rate, r*, will remain constant over the next 10 years. (Hint: Remember that the default risk premium and the liquidity premium...
ACLIVIly. Interest rate premiums B Video Excel Online Structured Activity: Interest rate premiums A 5-year Treasury...
ACLIVIly. Interest rate premiums B Video Excel Online Structured Activity: Interest rate premiums A 5-year Treasury bond has a 4.5% yield. A 10-year Treasury bond yields 6.1%, and a 10-year corporate bond yields 9.8%. The market expects that inflation will average 2.7% over the next 10 years (IP 10 = 2.7%). Assume that there is no maturity risk premium (MRP = 0) and that the annual real risk-free rate, r*, will remain constant over the next 10 years. (Hint: Remember...
14.Suppose that the current rate on 10-year Treasury bonds is 3.32%, on 20-year Treasury bonds is...
14.Suppose that the current rate on 10-year Treasury bonds is 3.32%, on 20-year Treasury bonds is 4.08%, and on a 20-year corporate bond is 6.92%. Assume that the maturity risk premium on 10-year corporate bonds is 0.35% and on 20-year corporate bonds it is 0.75%. If the default risk premium and liquidity risk premium on a 10-year corporate bond is the same as that on the 20-year corporate bond, what isthe current rate on a 10-year corporate bond? A. morethan...
If the 10-year Treasury bond rate is 9.0%, the inflation premium is 2.0% and maturity risk...
If the 10-year Treasury bond rate is 9.0%, the inflation premium is 2.0% and maturity risk premium on 10-year bond is .3%: Why would an investor purchase a treasury bond, versus a technical corporate stock like Apple or Netflix? Please advise in detail. If an investment has a high standard deviation, what does this tell the investor? How does inflation affect interest rates on bonds and other types of debt securities? Please advise.
Given the rate information in the table below, estimate the nominal rate for a AA-rated corporate...
Given the rate information in the table below, estimate the nominal rate for a AA-rated corporate bond. Assume a liquidity premium of 6 basis points. Identify as part of your answer the inflation risk premium, the default risk premium, the maturity premium, and the liquidity premium. 3-month T-bills 4.0% 30-year Treasury Bonds 6.0% AA-rated Corp. Bonds 8.0% Inflation Rate 2.5%
ACLIVIly. Interest rate premiums B Video Excel Online Structured Activity: Interest rate premiums A 5-year Treasury bond has a 4.5% yield. A 10-year Treasury bond yields 6.1%, and a 10-year corporate bond yields 9.8%. The market expects that inflation will average 2.7% over the next 10 years (IP 10 = 2.7%). Assume that there is no maturity risk premium (MRP = 0) and that the annual real risk-free rate, r*, will remain constant over the next 10 years. (Hint: Remember...
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