User Account

All Pages

Determinants of interest rates

Assignment Help Financial Management
Reference no: EM131022543

Determinants of Interest Rates

Suppose you and most other investors expect the inflation rate to be 8% next year, to fall to 4% during the following year, and then to remain at a rate of 3% thereafter. Assume that the real risk-free rate, r*, will remain at 2% and that maturity risk premiums on Treasury securities rise from zero on very short-term securities (those that mature in a few days) to a level of 0.2 percentage points for 1-year securities. Furthermore, maturity risk premiums increase 0.2 percentage points for each year to maturity, up to a limit of 1.0 percentage point on 5-year or longer-term T-notes and T-bonds.

Calculate the interest rate on 1-year Treasury securities. Round your answer to two decimal places.

__________ %

Calculate the interest rate on 2-year Treasury securities. Round your answer to two decimal places.

__________ %

Calculate the interest rate on 3-year Treasury securities. Round your answer to two decimal places.

__________%

Calculate the interest rate on 4-year Treasury securities. Round your answer to two decimal places.

__________%

Calculate the interest rate on 5-year Treasury securities. Round your answer to two decimal places.

__________ %

Calculate the interest rate on 10-year Treasury securities. Round your answer to two decimal places.

__________%

Calculate the interest rate on 20-year Treasury securities. Round your answer to two decimal places.

____________ %

Reference no: EM131022543

Questions Cloud

Achieve without having to raise funds externally : Charles Morris Builders Corporation (CMBC) generated $2 million in sales during 2015, and its year-end total assets were $1.5 million. Also, at year-end 2015, current liabilities were $500,000, consisting of $200,000 of notes payable, $200,000 of acc..
Finance program started working for based multinational firm : A recent graduate of a finance program started working for a US based multinational firm. He noticed that the company had recently entered into a contract to sell a large machine worth 5 million euros. The payment was to be delivered 180 days from no..
Company needing additional capital can either borrow : A company needing additional capital can either borrow it, or convince stockholders to invest more. If you were helping manage a company that was in the market for more capital, which of these two basic options would you recommend?
Considering changes in its working capital policies : Strickler Technology is considering changes in its working capital policies to improve its cash flow cycle. Strickler’s sales last year were $3,250,000 (all on credit), and its net profit margin was 7%. Its inventory turnover was 6.0 times during the..
Determinants of interest rates : Suppose you and most other investors expect the inflation rate to be 8% next year, to fall to 4% during the following year, and then to remain at a rate of 3% thereafter. Furthermore, maturity risk premiums increase 0.2 percentage points for each yea..
Preferred stock a more favorable investment : A company needing additional capital can either borrow it, or convince stockholders to invest more. If your choice was to issue preferred stock, and you anticipated a low demand for this type of security, what enhancements (features) would you includ..
Issuing stock or long-term debt-such as bonds : A company needing additional capital can either borrow it, or convince stockholders to invest more. List the various advantages and disadvantages of issuing stock or long-term debt, such as bonds.
What would total recruiting cost be for chester next year : Chester's turnover rate for this year is 6.29%. This rate is projected to remain the same next year and no further downsizing will occur from automating. Chester plans to spend an additional $500 beyond the extra amount above the $1000 recruiting bas..
When computing the net present value of a capital project : Which one of these is a requirement when computing the net present value of a capital project?

Reviews

Write a Review

Financial Management Questions & Answers

  Transformation of primary securities into secondary claims

What are the economic functions that financial intermediaries perform that benefit society? Be sure to explain how depository intermediaries, like banks, differ from other financial institutions such as investment banking firms or securities brokerag..

  Assume a risk-free rate and market risk premium

You are going to value Lauryn’s Doll Co. using the FCF model. After consulting various sources, you find that Lauryn has a reported equity beta of 1.6, a debt-to-equity ratio of 0.5, a tax rate of 30 percent, and net income last year of $42 million. ..

  Expanding rapidly-currently needs to retain all of earning

Microtech Corporation is expanding rapidly and currently needs to retain all of its earnings; hence, it does not pay dividends. However, investors expect Microtech to begin paying dividends, beginning with a dividend of $0.75 coming 3 years from toda..

  Corporate bonds of various credit ratings

Luther Industries needs to raise $25 million to fund a new office complex. The company plans on issuing ten-year bonds with a face value of $1000 and a coupon rate of 7.0% (annual payments). The following table summarizes the YTM for similar ten-year..

  What are the monthly payments

You wish to buy a $9,300 dining room set. The furniture store offers you a 2-year loan with an 10 percent APR. What are the monthly payments? Payment per month? How would the payment differ if you paid interest only?

  Calculate the tax on the sale of each asset

Capital gains taxes Perkins Manufacturing is considering the sale of two nondepreciable assets, X and Y. Asset X was purchased for $2,000 and will be sold today for $2,250. Asset Y was purchased for $30,000 and will be sold today for $35,000. The fir..

  Stock with the highest standard deviation of return

The Green Bay Packers are the only publicly owned NFL team. The stock in this team would have a great deal of systematic risk. The stock with the highest standard deviation of return should earn the highest rate of return.

  Consumer loans usually are repaid monthly-recurring income

Consumer loans usually are repaid monthly from recurring income. The bank's internal files are a valid source of credit history information. Indirect reference from employers are the best source of income verification.

  Determine additional cash management techniques

What are some ways in which a firm can improve its cash position? What are some ways that a firm can harm its cash position? Conduct your own research to determine additional cash management techniques.

  The after tax cost of debt is

Compute the cost of capital for the firm for the following: a. A bond that has a $1,000 par value (face value) and a contract or coupon interest rate of 11.1%. Interest payments are $55.50 and are paid semi annually. The after tax cost of debt is?

  Income statement to arrive cash paid for operating expenses

The necessary adjustment(s) to the operating expenses amount shown on the income statement to arrive at cash paid for operating expenses is(are):

  Directly listed as expense when calculating earnings

We begin the capital budgeting process by determining the incremental earnings of a project. The marginal corporate tax rate is the tax rate the firm will pay on an incremental dollar of pretax income. Investments in plant, property, and equipment ar..

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

Submit Assignment

Academics

Major Subjects

Majors

Get In Touch

whatsapp: +1-415-670-9521

Phone: +1-415-670-9521

Email: [email protected]

TERMS & POLICIES

HELP & SUPPORT

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd