Marshall Manufacturing has just borrowed money at 13% for 2 years. The pure rate of interest...
Marshall Manufacturing has just borrowed money at 13% for 2 years. The pure rate of interest is 2%. Marshall's default risk premium is 4%, its liquidity risk premium is 2%, and its maturity risk premium is 0.5%. Inflation is expected to be 3% during the first year of the loan's life. What does the lender expect the inflation rate to be in the loan's second year?
Homework Answers
| Interest rate for the 1st year = 2+4+2+0.5+3 = | 11.50% |
| Interest rate for the 2nd year = 1.13^2/1.115-1 = | 14.52% |
| Inflation rate for the 2nd year = 14.52-2-4-2.0.5 = | 6.47% |
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Marshall Manufacturing has just borrowed money at 13% for 2
years. The pure rate of interest...
QUESTION 6 Cortland Bank awarded a loan to SunEdison at 12% for 3 years. The pure rate of interest is 2%. The company's...
QUESTION 6 Cortland Bank awarded a loan to SunEdison at 12% for 3 years. The pure rate of interest is 2%. The company's default risk premium is 3%, its maturity risk premium is 1% and its liquidity risk premium is 2%. Inflation is expected to be 3% in the first year of the loan and 4% in the second year. What is the inflation rate expected to be in the loan's third year? For the toolbar, press ALT+F10 (PC) or...
Twisted Rail, Inc is a new brewery and just opened its doors. It recently received a...
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#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...
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just the answers please
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Assume that the real interest rate is 2%, the default risk premium is 3%, the liquidity...
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QUESTION 6 Cortland Bank awarded a loan to SunEdison at 12% for 3 years. The pure rate of interest is 2%. The company's default risk premium is 3%, its maturity risk premium is 1% and its liquidity risk premium is 2%. Inflation is expected to be 3% in the first year of the loan and 4% in the second year. What is the inflation rate expected to be in the loan's third year? For the toolbar, press ALT+F10 (PC) or...
#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...
Assume that the average real interest rate is 2%, the default risk premium is 3%, the liquidity premium is 1%, and the maturity risk premium is 2%. Additionally, expected inflation is 2% next year, 5% the year after, and 396 from then on. What is the nominal interest rate for a 10-year bond?
just the answers please
4. In the market for money, when the Fed decreases the money stock, the money supply curve shifts to the and the interest rate , everything else held constant. A) right; rises B) right; falls C) left; falls D) left; rises Milton Friedman called the response of lower interest rates resulting from an increase in the money supply the effect A) liquidity B) price level C) expected-inflation D) income Questions based on "06 Financial Markets -...
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