Homework Answers
Q19. 4%.
2 years from now means we are looking at 3-year bond.
The 3-year bond interest rate is 6%. The premium on this bond is 2%.
So, the expected interest rate on 1-year bond in 2 years is 6%-4%= 2%.
[Interest rate- premium = expected interest rate]
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Question 19 (0.9 points) Situation 6-2 The current 1-year, 2-year, and 3-year bond interest rates are...
Question 5 (0.9 points) Situation 6-2 The current 1-year, 2-year, and 3-year bond interest rates are...
Question 5 (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, the expectations theory of the term structure predicts that the expected 1-year bond interest rate is % two years from now. Question 6 (0.9 points) Over the next three years, the expected path of 1-year interest...
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Question 22 (0.9 points) Over the next three years, the expected path of 1-year interest rates is 1, 2, and 1 percent, and the 1-year, 2-year, and 3-year term premia are 0, 0.2, and 0.5 percent, respectively. Using the information, if the expectations theory of the term structure is true, then the current interest rate on 2-year bond must be % (round to one decimal place x.x). Question 23 (0.9 points) Over the next three years, the expected path of...
Compare a two-year bond with two successive one-year bonds in a situation in which an investor...
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(10 points) Assume that Expectations Theory of the term structure of interest rates is true. Current...
(10 points) Assume that Expectations Theory of the term structure of interest rates is true. Current yields on bonds of maturities 1 year through 5 years are given by: 4%, 3%, 3%, 4%, 4% Back out the expected current and expected future 1-year interest rates for the next five years from the information in the yields on bonds with maturities 1 through 5 year given above.
Suppose that 1-year interest rates over next 5 years are expected to be 5%, 6%, 7%,...
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1. A bond with two years remaining until maturity offers a 3% coupon rate with interest...
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Suppose interest rates on 1 year bonds are expected to be 0.6%, 0.7%,0.7% 0.8% and 0.8%...
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3. The current interest rate on a one-year bond is 9%, and you expect the interest...
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Suppose that the current 1-year rate (1-year spot rate) and expected 1-year T-bill rates over the...
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Round your answers to 2 decimal
places.)
Year Current (Long-Term) Rates
1 _____.__%
2 _____.__%
3...
Question 5 (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, the expectations theory of the term structure predicts that the expected 1-year bond interest rate is % two years from now. Question 6 (0.9 points) Over the next three years, the expected path of 1-year interest...
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(10 points) Assume that Expectations Theory of the term structure of interest rates is true. Current yields on bonds of maturities 1 year through 5 years are given by: 4%, 3%, 3%, 4%, 4% Back out the expected current and expected future 1-year interest rates for the next five years from the information in the yields on bonds with maturities 1 through 5 year given above.
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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 11%. What is the expected return over the two years?
Suppose that the current 1-year rate (1-year spot
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1R1 = 3.18%,
E(2r1) = 4.60%,
E(3r1) = 5.10%,
E(4r1) = 6.60%
Using the unbiased expectations theory, calculate the current
(long-term) rates for one-, two-, three-, and four-year-maturity
Treasury securities. (Do not round intermediate calculations.
Round your answers to 2 decimal
places.)
Year Current (Long-Term) Rates
1 _____.__%
2 _____.__%
3...
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