Homework Answers
1-year Corporation Bond:
Yield on
Corporation Bond = 6.00%
Maturity Risk Premium = 0.00%
Yield on
Corporation Bond = Real Risk-free Rate + Maturity Risk
Premium
6.00% = Real Risk-free Rate + 0.00%
Real Risk-free Rate = 6.00%
5-year Corporation Bond:
Real Risk-free Rate = 6.00%
Maturity
Risk Premium = (t - 1) * 0.15%, where t is number of period
Maturity Risk Premium = (5 - 1) * 0.15%
Maturity Risk Premium = 0.60%
Yield on
Corporation Bond = Real Risk-free Rate + Maturity Risk
Premium
Yield on Corporation Bond = 6.00% + 0.60%
Yield on Corporation Bond = 6.60%
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Question 3 5 pts Lennar Corporation's one-year bond has a yield equal to 6.0%. Suppose that...
Lennar Corporation's one-year bond has a yield equal to 6.1%. Suppose that the maturity risk premium...
Lennar Corporation's one-year bond has a yield equal to 6.1%. Suppose that the maturity risk premium (MRP) for all bonds with maturities greater than one year is 0.15% per year (i.e..(t-1) 0.15%). Based on this information, what should be the yield on Lennar's five-year bonds? Your answer should be between 4.58 and 8.12, rounded to 2 decimal places, with no special characters.
5 pts > Question 2 A Treasury bond that matures in 10 years has a yield...
5 pts > Question 2 A Treasury bond that matures in 10 years has a yield of 4.75%. A 10-year corporate bond has a yield of 7.35%. Assume that the liquidity premium on the corporate bond is 0.6%. What is the default risk premium on the corporate bond? Round your answer to two decimal places. Your answer should be between 0.74 and 2.52, rounded to 2 decimal places, with no special characters. Question 3 5 pts Lennar Corporation's one-year bond...
D Question 4 5 pts Sandino Corporation's 10 year, semiannual bond is currently selling at $850,...
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...
Question 4 Sandino Corporation's 10-year, semiannual bond is currently selling at $850, with a coupon rate...
Question 4 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 3.20%, what is the risk-free irre) rate? 5 pts Your answer should be between 180 and 3.58, rounded to 2 decimal places, with no special characters.
D Question 1 5 pts Assume that a 3-year Treasury security yields 5.00%. Also assume that...
D Question 1 5 pts Assume that a 3-year Treasury security yields 5.00%. Also assume that the real risk-free rate rs 0.75%, and inflation is expected to be 2.25% annually for the next 3 years. In addition to inflation, the nominal interest rate also includes a maturity risk premium (MRP) that reflects interest rate risk. What is the maturity risk premium for the 3-year security? Round your answer to two decimal places Your answer should be between 0.00 and 2.92,...
Sandino Corporation's 10-year, semiannual bond is currently selling at $850, with a coupon rate of 5%...
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.
Urmar Question 23 1 pts Drongo Corporation's 4-year bonds currently yield 4.1 percent and have an...
Urmar Question 23 1 pts Drongo Corporation's 4-year bonds currently yield 4.1 percent and have an inflation premium of 1.4%. The real risk-free rate of interest, r', is 1.4 percent and is assumed to be constant. The maturity risk premium (MRP) is estimated to be 0.1%(t-1), where t is equal to the time to maturity. The default risk and liquidity premiums for this company's bonds total 1 percent and are believed to be the same for all bonds issued by...
Crockett Corporation's 5-year bonds yield 6.35%, and 5-year T-bonds yield 4.45%. The real risk-free rate is...
Crockett Corporation's 5-year bonds yield 6.35%, and 5-year T-bonds yield 4.45%. The real risk-free rate is r* = 2.80%, the default risk premium for Crockett's bonds is DRP = 1.00% versus zero for T-bonds, the liquidity premium on Crockett's bonds is LP = 0.90% 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 inflation premium (IP)...
Question 2 5 pts A Treasury bond that matures in 10 years has a yield of...
Question 2 5 pts A Treasury bond that matures in 10 years has a yield of 4.75%. A 10-year corporate bond has a yield of 6,95%. Assume that the liquidity premium on the corporate bond is 0.6%. What is the default risk premium on the corporate bond? Round your answer to two decimal places. Your answer should be between 0.74 and 2.52, rounded to 2 decimal places, with no special characters.
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?
Lennar Corporation's one-year bond has a yield equal to 6.1%. Suppose that the maturity risk premium (MRP) for all bonds with maturities greater than one year is 0.15% per year (i.e..(t-1) 0.15%). Based on this information, what should be the yield on Lennar's five-year bonds? Your answer should be between 4.58 and 8.12, rounded to 2 decimal places, with no special characters.
5 pts > Question 2 A Treasury bond that matures in 10 years has a yield of 4.75%. A 10-year corporate bond has a yield of 7.35%. Assume that the liquidity premium on the corporate bond is 0.6%. What is the default risk premium on the corporate bond? Round your answer to two decimal places. Your answer should be between 0.74 and 2.52, rounded to 2 decimal places, with no special characters. Question 3 5 pts Lennar Corporation's one-year bond...
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...
Question 4 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 3.20%, what is the risk-free irre) rate? 5 pts Your answer should be between 180 and 3.58, rounded to 2 decimal places, with no special characters.
D Question 1 5 pts Assume that a 3-year Treasury security yields 5.00%. Also assume that the real risk-free rate rs 0.75%, and inflation is expected to be 2.25% annually for the next 3 years. In addition to inflation, the nominal interest rate also includes a maturity risk premium (MRP) that reflects interest rate risk. What is the maturity risk premium for the 3-year security? Round your answer to two decimal places Your answer should be between 0.00 and 2.92,...
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.
Urmar Question 23 1 pts Drongo Corporation's 4-year bonds currently yield 4.1 percent and have an inflation premium of 1.4%. The real risk-free rate of interest, r', is 1.4 percent and is assumed to be constant. The maturity risk premium (MRP) is estimated to be 0.1%(t-1), where t is equal to the time to maturity. The default risk and liquidity premiums for this company's bonds total 1 percent and are believed to be the same for all bonds issued by...
Question 2 5 pts A Treasury bond that matures in 10 years has a yield of 4.75%. A 10-year corporate bond has a yield of 6,95%. Assume that the liquidity premium on the corporate bond is 0.6%. What is the default risk premium on the corporate bond? Round your answer to two decimal places. Your answer should be between 0.74 and 2.52, rounded to 2 decimal places, with no special characters.
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