Suppose the liquidity premium on a two year bond is currently (3/2019) .8%, the current (3/2019)...
Suppose the liquidity premium on a two year bond is currently (3/2019) .8%, the current (3/2019) yield to maturity on a one year bond is 2.53%, and the yield curve is flat. Then, according to the liquidity premium hypothesis, the yield to maturity on a bond that matures in one year that is expected next year (3/2020) is ____%.
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Suppose the liquidity premium on a two year bond is currently
(3/2019) .8%, the current (3/2019)...
Suppose the yield to maturity on a two year bond is currently (3/2020) 3.2%, the current...
Suppose the yield to maturity on a two year bond is currently (3/2020) 3.2%, the current (3/2020) yield to maturity on a one year bond is 2.1%, and the term premium on a two year bond is .75%. Then, according to the liquidity premium hypothesis, the yield to maturity on a bond that matures in one year that is expected next year (3/2021) is ____%.
Which of the following are correct? i. The liquidity premium for a 2-year government bond is...
Which of the following are correct? i. The liquidity premium for a 2-year government bond is higher than the liquidity premium for a 5-year government bond. ii. The liquidity premium for a 3-year government bond is lower than the liquidity premium for a 3-year corporate bond. iii. The expected return from holding an illiquid two year zero-coupon bond to maturity is higher than the expected return from buying a liquid one-year zero-coupon bond (and holding it to maturity) followed by...
ECON 354 Problem Set 3 1. (Total 4 points, 2017 Final) The current yield curve for...
ECON 354 Problem Set 3 1. (Total 4 points, 2017 Final) The current yield curve for default-free zero-coupon bond is as follows: Maturity (years) Yield-to-maturity (%) 1% 2% 3% (a) What is the price of three-year zero coupon bond with the par value being $1,000 and the coupon rate being 2%? Assume that this coupon bond has no default risk and that one coupon payment is made every year (b) What are the implied one-year forward rates? (c) What is...
3. Suppose that the short-term risk-free interest rate this year is r1 8% and that the...
3. Suppose that the short-term risk-free interest rate this year is r1 8% and that the expected value of next year's interest rate is r2 7.5%. Suppose that a two-year zero coupon bond with face value $1000 sells for $820. a. What is the yield to maturity of the 2-year zero? b. Your answer to (a) demonstrates that the yield curve can slope upward even if the market thinks that interest rates are likely to fall. To explain this result,...
The yield to maturity on 1-year zero-coupon bonds is currently 7%; the YTM on 2-year zeros is 8%. The Government plans to issue a 2-year maturity coupon bond, paying coupons once per year with a coupo...
The yield to maturity on 1-year zero-coupon bonds is currently 7%; the YTM on 2-year zeros is 8%. The Government plans to issue a 2-year maturity coupon bond, paying coupons once per year with a coupon rate of 9%. The face value of the bond is $100. a. At what price will the bond sell? b. What will the yield to maturity on the bond be? (Hint: Use a financial calculator to get the YTM) c. If the expectations theory...
5. Assume the following interest rates Current Rate on a 1-year bond due in 2019: 4% Expected Rate on a 1-year bond due in 2020: 5% Expected Rate on a 1-year bond due in 2021: 6% Expected Rate on a 1-...
5. Assume the following interest rates Current Rate on a 1-year bond due in 2019: 4% Expected Rate on a 1-year bond due in 2020: 5% Expected Rate on a 1-year bond due in 2021: 6% Expected Rate on a 1-year bond due in 2022: 4% Expected Rate on a 1-year bond due in 2023: 2% a. According to the expectations theory for the yield curve, what would be the current rate on a 3-year bond due in 2021? Show...
Suppose that the interest rate on one-year bonds is currently 5.5 percent and is expected to...
Suppose that the interest rate on one-year bonds is currently 5.5 percent and is expected to be 5 percent in one year and 7 percent in two years. Using the Expectations Hypothesis, compute the yield curve for the next three years. Round you answers to the nearest hundredth (2 decimal places). Yield for one-year bond Yield for two-year bond Yield for three-year bond
Suppose that the interest rate on one year bonds is currently 3.5 percent and is expected...
Suppose that the interest rate on one year bonds is currently 3.5 percent and is expected to be 4 percent in one year and 6 percent in two years. Using the expectations hypothesis, compute the yield curve for the next three years. Instructions: Enter your responses rounded to the nearest two decimal places. Yield for one-year bond Yield for two-year bond - Yield for three-year bond- 3.5% % %
suppose that the short-term risk-free interest rate this year is ri-8% and that the expected value...
suppose that the short-term risk-free interest rate this year is ri-8% and that the expected value of next year's interest rate is r2-7.5%. Suppose that a two-year zero coupon bond with face value $1000 sells for $820. a. What is the yield to maturity of the 2-year zero? b. Your answer to (a) demonstrates that the yield curve can slope upward even if the market thinks that interest rates are likely to fall. To explain this result, calculate the forward...
A treasury bond that matures in 10 years has a yield of 2.0%. A 10-year bond...
A treasury bond that matures in 10 years has a yield of 2.0%. A 10-year bond issued by Dahlia Corporation has a yield of 8% and a default risk premium of 2.7%. What is the liquidity premium of the corporate bond? 4.70% 12.70% None of these 3.30% 5.30% Suppose that Raven Inc stock is expected to pay a dividend of $1.50 per year. If Raven’s stock has a beta 2.1 and the current stock price is $46, what is the...
ECON 354 Problem Set 3 1. (Total 4 points, 2017 Final) The current yield curve for default-free zero-coupon bond is as follows: Maturity (years) Yield-to-maturity (%) 1% 2% 3% (a) What is the price of three-year zero coupon bond with the par value being $1,000 and the coupon rate being 2%? Assume that this coupon bond has no default risk and that one coupon payment is made every year (b) What are the implied one-year forward rates? (c) What is...
3. Suppose that the short-term risk-free interest rate this year is r1 8% and that the expected value of next year's interest rate is r2 7.5%. Suppose that a two-year zero coupon bond with face value $1000 sells for $820. a. What is the yield to maturity of the 2-year zero? b. Your answer to (a) demonstrates that the yield curve can slope upward even if the market thinks that interest rates are likely to fall. To explain this result,...
Suppose that the interest rate on one year bonds is currently 3.5 percent and is expected to be 4 percent in one year and 6 percent in two years. Using the expectations hypothesis, compute the yield curve for the next three years. Instructions: Enter your responses rounded to the nearest two decimal places. Yield for one-year bond Yield for two-year bond - Yield for three-year bond- 3.5% % %
suppose that the short-term risk-free interest rate this year is ri-8% and that the expected value of next year's interest rate is r2-7.5%. Suppose that a two-year zero coupon bond with face value $1000 sells for $820. a. What is the yield to maturity of the 2-year zero? b. Your answer to (a) demonstrates that the yield curve can slope upward even if the market thinks that interest rates are likely to fall. To explain this result, calculate the forward...
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