ZuoTi.Pro
Question










3. The current interest rate on a one-year bond is 9%, and you expect the interest rate on the one-year bond next year to be
business   finance   
0 0
Add a comment Improve this question Transcribed image text
Next > < Previous
Sort answers by oldest

Homework Answers

Answer #1

Expected total return over the two years=(1+rate on one year)*(1+rate next year)-1=1.09*1.11-1=20.99%

Expected annual return over the two years=((1+rate on one year)*(1+rate next year))^(1/2)-1=(1.09*1.11)^(1/2)-1=10.00%

0 0
Add a comment
Know the answer?
Add Answer to:
3. The current interest rate on a one-year bond is 9%, and you expect the interest...
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for? Ask your own homework help question. Our experts will answer your question WITHIN MINUTES for Free.
Similar Homework Help Questions

  • Question 19 (0.9 points) Situation 6-2 The current 1-year, 2-year, and 3-year bond interest rates are...

    Question 19 (0.9 points) Situation 6-2 The current 1-year, 2-year, and 3-year bond interest rates are 4%, 5%, and 6%, respectively. The 1-year, 2-year, and 3-year term premia are estimated to be 0, 1, and 2 percent, respectively. Using the information in Situation 6-2, currently, the market expects the 1-year bond interest rate to be % two years from now. Question 20 (0.9 points) Over the next three years, the expected path of 1-year interest rates is 1, 2, and...

  • If the current one year interest rate is 3.5% and next year’s one year rate is...

    If the current one year interest rate is 3.5% and next year’s one year rate is 5.5%, what is the current two year rate? If the current three year interest rate is 7%, what is the current one year interest rate? Assume next year’s one year rate is 5.5% and the one year rate two years from now is 7.25%. Find the one year interest rate for four years from now. Assume the five year interest rate is 5.5%, the...

  • Assume that the current interest rate on a one-year bond is 8 percent, the current rate...

    Assume that the current interest rate on a one-year bond is 8 percent, the current rate on a two-year bond is 10 percent, and the current rate on a three-year bond is 12 percent. If the expectations theory of the term structure is correct, what is the one-year interest rate expected during Year 3? (Base your answer on an arithmetic average rather than a geometric average.) Group of answer choices 13% 14% 16% 12% 10%

  • The current interest rate on a one-year bond is 4 percent and the current rate on...

    The current interest rate on a one-year bond is 4 percent and the current rate on a two-year bond is 4.4 percent. If the expectations theory of the term structure is correct, what is the one-year interest rate expected during Year 2? That is, compute the rate that is expected to exist only during Year 2. (Base your answer on an arithmetic average rather than a geometric average.) 8.4% 4.8% 0.4% 4.4% 4.2%

  • Assume the current interest rate on a one-year Treasury bond ( ) is 1.10 percent, the...

    Assume the current interest rate on a one-year Treasury bond ( ) is 1.10 percent, the current rate on a two-year Treasury bond (R2) is 1.26 percent, and the current rate on a three-year Treasury bond (1R3) is 1.37 percent. If the unbiased expectations theory of the term structure of interest rates is correct, what is the one-year interest rate expected on T-bills during year 3 (E3or 3)? (Do not round intermediate calculations. Round your answer to 2 decimal places....

  • Current spot rate is $1.20/€ French interest rate on a 30-day bond is 1.5% You expect...

    Current spot rate is $1.20/€ French interest rate on a 30-day bond is 1.5% You expect the spot exchange rate to be $1.30/€ in 30 days. What is the expected uncovered dollar return on the French asset?

  • Assume the current interest rate on a one-year Treasury bond (1R1) is 2.17 percent, the current...

    Assume the current interest rate on a one-year Treasury bond (1R1) is 2.17 percent, the current rate on a two-year Treasury bond (1R2) is 2.33 percent, and the current rate on a three-year Treasury bond (1R3) is 2.44 percent. If the unbiased expectations theory of the term structure of interest rates is correct, what is the one-year interest rate expected on T-bills during year 3 (E(3r1) or 3f1)?

  • According to the expectations hypothesis, What do you expect the interest rate on a two-year bond...

    According to the expectations hypothesis, What do you expect the interest rate on a two-year bond to be three years from now? The current interest rates for different maturities are as follows: Maturity Rate 1-year 3.00 2-year 3.50 3-year 3.75 4-year 4.00 5-year 4.00 Enter your answer as a percent without the % sign. Round your final answer to two decimals.

  • Suppose that today (3/11/20) the current ytm on a bond that matures in one year rate...

    Suppose that today (3/11/20) the current ytm on a bond that matures in one year rate is 4% and the ytm on a bond that matures in two years is 7%. If the PEH is correct, then the expected ytm one year from today (3/11/21) on a bond that matures in one year rate from then (3/11/22) is _________ %

  • #13 What is the expected one-year interest rate on a 1-year 1-Bill in four years? 12....

    #13 What is the expected one-year interest rate on a 1-year 1-Bill in four years? 12. YOP, Inc has a 3-year outstanding bond with 13% yield. Investors expect to earn an average of 3% in real rate of return. Inflation is expected to be 1.5%, 2.0% and 4% for the next 3 years. Its lack of popularity in the financial market requires it to pay 2.5% for its lack of liquidity, and its relatively short amount of time before maturity...

ADVERTISEMENT
Free Homework Help App
Download From Google Play
Scan Your Homework
to Get Instant Free Answers
Need Online Homework Help?
Ask a Question
Get Answers For Free
Most questions answered within 3 hours.
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT