Question

D Question 4 5 pts Sandino Corporation's 10 year, semiannual bond is currently selling at $850, with a coupon rate of 5% and a nominal rate (YTM) of 7.12%. Given an annual maturity risk premium (MRP) of (t-1)*0.10%, the bond's liquidity premium (LP) of 0.40% and default risk premium (DRP) of 3.55%, what is the risk-free (TRF) rate? Your answer should be between 1.80 and 3.58, rounded to 2 decimal places, with no special characters. Question 5 5 pts Suppose that the yield on a two-year Treasury security is 5.84%, and the yield on a five-year Treasury security is 6.06%. Assuming that the pure expectation theory is correct, what is the market's estimate of the three-year Treasury rate two years from now? The error margin will allow either arithmetic or geometric averaging on this question. Your answer should be between 5.58 and 7.98, with no special characters. You may round to 4 decimal places if you wish, but only 2 decimal places are necessary for a correct answer.

Answer 1

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W @ E C Ax 3 ENG, 03:22 16-03-2020 ... o X JJ86 JH л J JK JL M N 69 70 SANDINO 71 72 YIELD = YIELD = r* + IP + MRP + LP + DRP rRF + MRP + LP + DRP 73 74 75 YTM= 7.12% 76 IP = 77 78 MRP= DRP= LP = 0.90% [(t-1)*0.10% = (10-1) *0.10%] 3.55% 0.40% 19 81 YIELD = 7.12% = 82 rRF + MRP + LP + DRP rRF + 0.90% +0.40% + 3.55% 2.27% rRF = 83 answer 84 85 86 87 88 89 YIELD SPOT AFN BANKING NOTE Sheet2 51 53 CLEAN PRICE S10 BIDDING, UNDERWRITING EUAC AW LIFE LP, IP, MRP, INFLATION WARR ... Đ : 1

W @ E C Ax 3 ENG, 03:23 16-03-2020 ... o X EU1047 : x EQ ER E S ET EU EV EW EX EY E Z FA FA 1R2= 5.84% 1R5= 6.06% 5f2 =[(1 + 1R5)^5/(1+1R2)^2]^(1/3) -1 = 5f2 =[(1 + 0.0606)^5/(1+0.0584)^2]^(1/3) -1 = 0.062069207 = 6.2069% ANSWER = 6.21 1034 1035 1036 1037 1038 1039 1040 1041 1042 1043 1044 1045 1046 1047 1048 1049 1050 1051 1052 1053 1054 1055 1056 1057 1000 YIELD SPOT AFN BANKING NOTE Sheet2 51 53 CLEAN PRICE 510 BIDDING, UNDERWRITING EUAC AW LIFE LP, IP, MRP, INFLATION WARR ... + : 7