Calculate the securitys equilibrium rate of return

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i) What is the present value of $810 annuity payment over 4 years if interest rate is 8%?

ii) Compute the future value in a year of $3,500 deposit in year 1 and another 3,000 deposit at the end of year 3 using a 10% interest rate.

iii) One year treasury bills currently earn 2.80 percent. you expect I year from now a 1 year treasury bill rate to increase to 3.00 percent and that two year from now, 1 year treasury bill rates will I increase 3.50 percent. The liquidity premium on a 2 year security is 0.10 percent and on3-year securities are 0.20 percent. If the liquidity premium theory is correct what should the current rate be on 3-year treasury securities?

iv) A particular security's risk default risk premium is 2 percent. The inflation risk premium is 1.90 percent and the real risk-free rate is 3.80 percent. The security's liquidity risk premium is 0.10 percent maturity risk premium is 0.70 percent. Calculate the security's equilibrium rate of return.

Reference no: EM131367583

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