1. Below are the annualized yields on zero - coupon U.S. Treasuries. Use these data to...
1. Below are the annualized yields on zero - coupon U.S. Treasuries. Use these data to answer the following questions.
| Maturity | 1-yr | 2-yr | 3-yr | 5-yr | 7-yr | 10-yr | 20-yr | 30-yr |
| Rate | 0.79% | 1.15% | 1.40% | 1.81% | 2.14% | 2.34% | 2.68% | 2.96% |
a. What is the seven-year forward holding rate of return between years 3 and 10 (r3,10)?
b. What is the annualized rate of return between years 7 and 30(r7,30)?
Homework Answers
a. 7 year forward rate = (1.023410/1.02143)1/7 - 1 = 2.43%
b. rate of return between years 7 and 30 = (1.029630/1.02147)1/23 - 1 = 3.21%
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1. Below are the annualized yields on zero - coupon U.S.
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Given the observed yields below, what is the 1-year forward rate, 4 years from now? [Hint:...
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1. Suppose you are considering purchasing some zero-coupon bonds, with par values of $2,500 each. They all mature in seven years, and right now the price on each of them is $2,098.42. Determine the yield to maturity. Now suppose a new president is elected, and as a result the bonds' prices fall to $1,947.66. What's the new yield? 2. Your rich uncle has just died and left you a bond with a maturity date of 3/15/2032. You decide to sell...
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E6-2 The yields for Treasuries with differing maturities on a recent day were as shown in the table below. Maturity 3 months 6 months 2 years 3 years 5 years 10 years 30 years Yield 1.41% 1.71 2.68 3.01 3.70 4.51 5.25 a. Use the information to plot a yield curve for this b. If the expectations hypothesis is true, the expectations hypothesis is true, approximately what rate of return do in- vestors expect a 5-year Treasury note to pay...
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Suppose that a 1-year zero-coupon bond with face value $100 currently sells at $88.99, while a 2-year zero sells at $76.99. You are considering the purchase of a 2-year-maturity bond making annual coupon payments. The face value of the bond is $100, and the coupon rate is 16% per year. a. What is the yield to maturity of the 2-year zero?(Do not round intermediate calculations. Round your answers to 3 decimal places.) Yield to Maturity 2-year zero 10 b. What...
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