Reference no: EM131027016
Determinants of Interest Rates
Suppose you and most other investors expect the inflation rate to be 7% next year, to fall to 5% 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.
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Calculate the interest rate on 2-year Treasury securities. Round your answer to two decimal places.
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Calculate the interest rate on 3-year Treasury securities. Round your answer to two decimal places.
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Calculate the interest rate on 4-year Treasury securities. Round your answer to two decimal places.
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Calculate the interest rate on 5-year Treasury securities. Round your answer to two decimal places.
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Calculate the interest rate on 10-year Treasury securities. Round your answer to two decimal places.
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Calculate the interest rate on 20-year Treasury securities. Round your answer to two decimal places.
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Making equal monthly deposits into your account
: You are planning to retire and have decided: you will retire in 33 years and would like to have $7,000 per month as retirement income for 30 years of retirement. How much will you need to have when you retire to be able to withdraw the desired $7,000..
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What is the amount of each interest payment
: The semiannual, 8-year bonds of Alto Music are selling at par and have an effective annual yield of 8.6285 percent. What is the amount of each interest payment if the face value of the bonds is $1,000? Format to 6 decimal places.
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What is the current yield and yield to maturity
: BMW issued 20 year $1,000 bonds in 2014 with an annual coupon rate of 7.45%. In 2016 after the coupon for 2016 is paid, that bond can be purchased for $1,285. If you bought this bond, what is the current yield and yield to maturity?
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Expected return on the portfolio
: A portfolio is entirely invested into Bruno's Gold Mining Equity, which is expected to return 18%, and Alfred's Inc. bonds, which are expected to return 6%. Three quarters of the funds are invested in Bruno's and the rest in Alfred's. What is the exp..
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Determinants of interest rates
: Suppose you and most other investors expect the inflation rate to be 7% next year, to fall to 5% during the following year, and then to remain at a rate of 3% thereafter. Calculate the interest rate on 2-year Treasury securities. Calculate the intere..
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Find the monthly payment-the future value
: The term of the loan is 10 years, you will make monthly payments, and the interest rate is 4% annual compounded monthly. Find the monthly payment, the future value, and the annual effective rate.
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Bonds issued-what is the yield to maturity
: The bonds issued by Stainless Tubs bear a 6 percent coupon, payable semiannually. The bonds mature in 11 years and have a $1,000 face value. Currently, the bonds sell for $989. What is the yield to maturity?
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The outstanding bonds of winter time products
: The outstanding bonds of Winter Time Products provide a real rate of return of 3.90 percent. The current rate of inflation is 2.20 percent. What is the nominal rate of return on these bonds?
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Who earns the return on the investment
: You run a company, GizmoNet, that produces gizmos. Gizmos hook onto Nintendo Game Boys (hand-held electronic game players), allowing users to access the Internet using wireless communication protocols. Thus, they turn Game Boys into hand-held web bro..
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