Reference no: EM131070816
Show all work for full credit. Given the following data on U.S. Agency debt instruments:
• 1-year note yield = 3.42% 7-year note yield = 4.64%
• 2-year note yield = 3.69% 8-year note yield = 4.70%
• 3-year note yield = 4.02% 9-year note yield = 4.86%
• 4-year note yield = 4.02% 10-year note yield = 4.95%
• 5-year note yield = 4.35% 11-year note yield = 4.90%
• 6-year note yield = 4.50% 12-year note yield = 4.99%
And constant premiums of 0, .17%, .41%, .63%, .82%, .98%, 1.12%, 1.22%, 1.30%, 1.37%, 1.42%, 1.45%, 1.47%
a. Calculate the expected liquidity premium yields for a (1,5,2) path.
b. Calculate the expectations yields for a (3,4,1) path.
c. Calculate the real world yield for a (3,5) path.
d. Calculate the expected pure expectations yield for a 3-year note purchased at the beginning of year 5.
e. Calculate the expected preferred habitat yield on a 6-year note purchased at the beginning of year 3.
f. Determine the expectations yield on a 10-year note purchased today.
g. Determine the market yield on a 12-year note purchased today.
h. Describe the yield curve and provide a general interpretation of what implies about the economy.
|
Initial investment in net working capital-what bid price
: Romo Enterprises needs someone to supply it with 130,000 cartons of machine screws per year to support its manufacturing needs over the next five years, and you’ve decided to bid on the contract. You also need an initial investment in net working cap..
|
|
What would be rate of five year treasury and corporate notes
: NI= RI+IP+RP+LP+DP What does each variable represent and why does it affect nominal interest? If the risk-free rate of interest is 3%, and for a 5 year period, the inflation premium is to be 5%, the interest rate risk premium is .1% annually (Except ..
|
|
What ACH and EFT are and how they are being used today
: With the increasing use of ACH and EFT (and Bank Wires), has the game changed for how companies can manage their cash. Who can tell me what ACH and EFT are and how they are being used today.
|
|
What is the duration of bond
: Stone & Co. bonds are selling at 95, yielding 5.25%, let's assume that yields increase by 25bps, causing the price to decline to 93. How much has the price changes, in percentage? Now let's assume that yields decrease by 25 bps, causing the price to ..
|
|
Calculate the expected liquidity premium yields for path
: Calculate the expected liquidity premium yields for a (1,5,2) path. Calculate the expectations yields for a (3,4,1) path. Calculate the real world yield for a (3,5) path. Calculate the expected pure expectations yield for a 3-year note purchased at t..
|
|
Calculate expected rate and standard deviation of return
: The common stock of Leaning Tower of Pita Inc., a restaurant chain, will generate payoffs to investors next year, which depend on the state of the economy, as follows: The company goes out of business if a recession hits. Calculate the expected rate ..
|
|
About the forward contract
: Forward Contract. The Wolfpack Corporation is a U.S. exporter that invoices its exports to the United Kingdom in British pounds. If it expects that the pound will appreciate against the dollar in the future, should it hedge its exports with a forward..
|
|
The required rate of return on the project
: A company considers a new project. The required rate of return (WACC) on the project is 10 percent. Which of the following statement is correct?
|
|
What will be the rate of return on the bond
: A 2-year maturity bond with face value of $1,000 makes annual coupon payments of $92 and is selling at face value. What will be the rate of return on the bond if its yield to maturity at the end of the year is (Do not round intermediate calculations...
|