According to the expectations theory of interest rates

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Reference no: EM131848172

1. What is the future value of $3,200 in 19 years assuming an interest rate of 8.5 percent compounded semiannually?

2. You purchase a 7 year, 12% bond at a YTM of 6%. You sell the bond 1 year later at a YTM of 7%. What is your percentage capital gain on this investment? Answer to 4 decimal places, for example 0.1234.

3. Suppose the current one-year Treasury Bill rate is 3%, the current three-year Treasury Bond rate is 3.3%, and the current five-year Treasury Bond rate is 4%. According to the expectations theory of interest rates, what would you expect the four-year Treasury bond rate to be one year from now?

a) 3.2%

b) 3.5%

c) 3.8%

d) 4.25%

Reference no: EM131848172

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