1 | as we know interest rate | ||||||||
R = r* + IP + DRP + MRP + LP | |||||||||
Here for govt security DRP is 0 | |||||||||
so, | |||||||||
12% = 2.5% + 3% + 0% + 2% + LP | |||||||||
LP = 12% - 7.5% | |||||||||
LP = 4.5% | |||||||||
We can verify it since for normal security | |||||||||
R = 2.5%+3.%+1.5%+2%+4.5% = 13.5% | |||||||||
its more than govt security by 1.5% that is just because DRP is 1.5% in normal security | |||||||||
and 0 in govt security | |||||||||
2 | Since you start saving when you were 22 yrs old till you got 35th yr age | ||||||||
Its 13 yrs saving time or 156 months for which you have to save a target amount | |||||||||
So: | |||||||||
Set | |||||||||
FV | 386000 | ||||||||
NPER(N) | 156 | (13 x 12) | |||||||
Rate(I/Y) | 0.0054167 | (6.5%/12) | |||||||
PMT | ($1,580.76) | Press CPT+PMT in BA-II to get the results | |||||||
=PMT(6.5%/12,156,,386000) | |||||||||
So you have to save $1,580.76 per month to have $386000 at 35th birthday | |||||||||
There is a financial product A which is guaranteed by government generates 12% annual return. It has no default risk and only exposure to liquidity risk and maturity risk. Assume there is an...
There is a financial product A which is guaranteed by government generates 12% annual return. It has no default risk and only exposure to liquidity risk and maturity risk. Assume there is another same term product that provides 2% maturity premium and 1.5% default risk premium. If the expected inflation rate is 3% next year, the real return of one-year treasury note is 2.5%. The implicit liquidity premium compensated by product A is equal to:
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