ZuoTi.Pro
Question

For the next 4 questions suppose the following data on yields from WSJ holds 3-month T-Bill 30-year T-Bond 30-year AAA-Corporate 30-year Municipal 3.0% 14.5% 16.0% 14.2% - What is the real risk-free rate for 3-month if the inflation for 3 months is estimated as 2967 o 1.0% 1.2% 1.5% 1.6% 2.0%
QUESTION 49 1 pa What is the maturity risk premium on 30-year Treasury bonds? Assume the expected inflation for 3-month T-Bills and 30-year T-Bonds is the same. 0.8% 1.0% 1.2% 1.5% 2.296
QUESTION 50 What is the default risk premium on 30-year AAA corporate bonds? Assume there exist liquid markets for AAA corporate bonds. o 0.8% 1.0% 0 1.2% o 1.4% 0 1.596
QUESTION 51 Assume the same risk for 30-year AAA Corporate bonds and 30-year Municipal Bonds. If you are indifferent between the two bonds what is your implied marginal tax rate? 25% 28% 29% 30% 32%
business   finance   
0 0
Add a comment Improve this question Transcribed image text
Next > < Previous
Sort answers by oldest

Homework Answers

Answer #1

SEE THE IMAGE. ANY DOUBTS, FEEL FREE TO ASK. THUMBS UP PLEASE

Home nert Page Layout Formulas Data Review View dd-Ins s Cut ta copy. Σ AutoSum ー E ゴWrap Text General в 1 프 . Ej-., Δ. : rーー 逻锂函Merge & Center. $, % , 弼,8 Conditional Format eCell Insert Delete Format Paste Sort &Find & 2 ClearFe Select Edting Format Painter Formatting, as Table w styles. Styles ▼ ㆆ ▼ Clipboard Font Alignment Number Cells BX270 BQ BR BS BT BU BV BW BX BY BZ CA 254 255 256 257 258 259 260 261 262 263 264 265 266 267 268 269 270 271 272 Q.48 YIELD ON 3 MONTH T-BILL = r* + IP 396-r* + IP 396-r* + 2% r* 196 REAL RISK FREE RATE = r*-196 Q.49 YIELD ON 30 YEAR B-BOND-r* + IP + MRP 4.5%-r + IP + MRP 4.5%-1% + 2% + MRP MRP-1.5% MATURITY RISK PREMIUM Q.50 YIELD ON 30 YEAR AAA CORPORATE BOND r* + IP + MRP + DRP 696-r* +IP + MRP +DRP 6%-1% +2% + 1.5% + DRP DRP = 1.5% DEFAULT RISK PREMIUM Q.51 30 YEAR MUNICIPAL BOND = 4.2% 30 YEAR AAA CORPORATE BOND-696 YIELD SPOT Sheet2 AFN BANKING NOTE BIDDING, UNDERWRITING EUAC AW PM LIFE LP ip, MRP INFLATION YIELD WARRANT fund bond CLEAN INVOICE PRICE LI 05-01-2019Home nert Page Layout Formulas Data Review View dd-Ins s Cut aCopy Σ AutoSum ー E ゴWrap Text General в 1 프 . Ej-., Δ. : rーー 逻锂函Merge & Center. $, % , 弼,8 Conditional Format eCell Insert Delete Format Paste Sort &Find & Format Painter Formatting as Table Styles2 Clear Clipboard Font Alignment Number Styles Cells Edting BX289 BQ BR BS BT BU BV BW BX BY BZ CA 271 272 273 274 275 276 277 278 279 280 281 282 283 284 285 286 287 288 289 Q.51 30 YEAR MUNICIPAL BOND = 4.2% TO MAKE BOTH BOND EQUAL, YIELD ON COPORATE BOND(1-t) YIELD ON MUNICIPAL BOND 6%( 1-t)-4.2% 1-t-4.2%/696 1-t-0.7 t-0.3 TAX RATE-30% 30 YEAR AAA CORPORATE BOND = 6% YIELD SPOT Sheet2 AFN BANKING NOTE BIDDING, UNDERWRITING EUAC AW PM LIFE LP ip, MRP INFLATION YIELD WARRANT fund bond CLEAN INVOICE PRICE LI 05-01-2019

0 0
Add a comment
Know the answer?
Add Answer to:
For the next 4 questions suppose the following data on yields from WSJ holds 3-month T-Bill...
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for? Ask your own homework help question. Our experts will answer your question WITHIN MINUTES for Free.
Similar Homework Help Questions

  • For the next 4 questions suppose the following data on yields from WSJ holds: 3-month T-Bill...

    For the next 4 questions suppose the following data on yields from WSJ holds: 3-month T-Bill 30-year T-Bond 30-year AAA Corporate 30-year Municipal What is the real risk free rate for 3-month if the inflation for 3 months is estimated as 3.0967 5.0% 72% 8.6% 6.02% 1,8% o 20% 2.2% 2.4% 2.696 What is the maturity risk premium on 30-year Treasury bonds? Assume the expected inflation for 3-month T-Bills and 30-year T-Bonds are the same. 0.8% 10% 1.296 1.896 2.2%...

  • These 4 questions are grouped together. Could use assistance with these "4" Remalning Time: 54 minutes,...

    These 4 questions are grouped together. Could use assistance with these "4" Remalning Time: 54 minutes, 38 seconds. Question Completlon Status For the next 4 questions suppose the following data on yields from WSJ holds: 3-month T-B 30-year T-Bond 30-year AAA Corporato 30-year Municipal what is the real risk free rate for 3-month if the inflation for 3 months is estimated as 3.0%? 50% 7.2% | 8.6% 6.02% 1.8% o 2.0% 2.2% О 24% 0 2.6% QUESTION 34 What is...

  • Answer the next 3 questions based on the following information: Assume that3-month Treasury bill are yielding...

    Answer the next 3 questions based on the following information: Assume that3-month Treasury bill are yielding 1.4%, 10-year Treasury bonds are yielding 2.8%, an Aaa-rated 10-year corporate bond is 5%, and real risk-free rate is 1%. 18) What is the inflation risk premium for 3-month Treasury b ill? (Hint: the inte rest rate of 3-month Treasury bill is a proxy for risk-free rate) A) 1.8% B) 1.4% C) 1% D) 0.4% 19) What is the maturity risk premium for 10-year...

  • Suppose the inflation rate is expected to be 2% next year, 3% the following year, and...

    Suppose the inflation rate is expected to be 2% next year, 3% the following year, and 5% thereafter. Assume that the real risk free rate will remain constant at 1% and that MRP = (0.25x(t-1))% where t is the number of years to maturity. The default risk premium on 5 year corporate bonds is 0.75% and the liquidity premium on 5 year corporate bonds is 0.25%. a. Calculate the interest rate on a 5 year treasury security. b. Calculate the...

  • QUESTION 45 For the next 2 questions suppose the following holds: Suppose you are the money...

    QUESTION 45 For the next 2 questions suppose the following holds: Suppose you are the money manager of a $10 million investment fund. The fund consists of 2 stocks with the following investment and betas. Assume that the CAPM holds, and IRF-696, rMf12%. Stock Investment $4 million $ 6 million Beta 1.0 1.5 What is beta of the investment fund? O 1.2 O 1.3 O 1.35 O 1.4 O 1.45 What is the expected return of the fund? O 13.8%...

  • 23. (a) = 4% You are given the following data for a corporate bond in a...

    23. (a) = 4% You are given the following data for a corporate bond in a particular economy: r* = real risk-free rate Inflation premium Maturity risk premium = 1% Default risk premium Liquidity premium = 7% = 3% = 2% Assume that a highly liquid market does not exist for long-term Treasury bonds in that economy, and the expected rate of inflation is constant. Given these conditions find the appropriate rates for a Treasury bill and a long-term Treasury...

  • QUESTION 13 Assume that 1-year T-bills currently yield 5.00% and the future inflation rate is expected...

    QUESTION 13 Assume that 1-year T-bills currently yield 5.00% and the future inflation rate is expected to be constant at 2.0% per year. What is the real risk-free rate of return, r"? 6.50% 5.00% 4 50% 4004 3.00% QUESTION 14 Suppose 10-year T-bonds have a yield of 4.00% and 10-year corporate bonds yield 6.50%. Also, corporate bonds have a 0.50% liquidity premium versus a zero iquidity premium for T-bonds, and the maturity risk premium on both Treasury and corporate 10-year...

  • Suppose 10-year T-bonds have a yield of 5-30% and 10-year corporate bonds yield 6.65%. Also, corporate...

    Suppose 10-year T-bonds have a yield of 5-30% and 10-year corporate bonds yield 6.65%. Also, corporate bonds have a 0.25% liquidity premium versus a zero liquidity premium for T-bonds, and the maturity risk premium on both Treasury and corporate 10-year bonds is 1.15% What is the default risk premium on O corporate bonds? o a. 1.20% b. 1.22% c.0.86% O d. 1.10% 134%

  • Some​ agreed-upon procedures related to generating estimates for key variables in equation​ (2-1) follow. a. The...

    Some​ agreed-upon procedures related to generating estimates for key variables in equation​ (2-1) follow. a. The current​ 3-month Treasury bill rate is 3.05 ​percent, the​ 30-year Treasury bond rate is 5.32 ​percent, the​ 30-year Aaa-rated corporate bond rate is 6.74 ​percent, and the inflation rate is 2.33 percent . b. The real​ risk-free rate of interest is the difference between the calculated average yield on​ 3-month Treasury bills and the inflation rate. c. The​ default-risk premium is estimated by the...

  • Given the rate information in the table below, estimate the nominal rate for a AA-rated corporate...

    Given the rate information in the table below, estimate the nominal rate for a AA-rated corporate bond. Assume a liquidity premium of 6 basis points. Identify as part of your answer the inflation risk premium, the default risk premium, the maturity premium, and the liquidity premium. 3-month T-bills 4.0% 30-year Treasury Bonds 6.0% AA-rated Corp. Bonds 8.0% Inflation Rate 2.5%

ADVERTISEMENT
Free Homework Help App
Download From Google Play
Scan Your Homework
to Get Instant Free Answers
Need Online Homework Help?
Ask a Question
Get Answers For Free
Most questions answered within 3 hours.
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT