Determine the correct rate for a 2-year loan to be made

Reference no: EM133492013

Question: A bank loan department is trying to determine the correct rate for a 2-year loan to be made two years from now. If current implied Treasury effective annual spot rates are 1-year = 2%, 2-year = 3%, 3-year = 3.5%, and 4-year = 4.5%, the base (risk-free) forward rate for the loan before adding a risk premium is closest to: A) 4.5%. B) 6.0%. C) 9.0%.

Reference no: EM133492013

Questions Cloud

Calculate the current implied spot price : Calculate the current (i.e., August 20th) implied spot price for a ton of the commodity and the November 20th implied price for the same ton

Analyze existing characteristics of a learning organization : Analyze existing characteristics of a learning organization. Recommend adjustments to create a more effective learning organization.

Describe what you can do to undo the effect of this decision : How many new shares must the firm? issue - Assuming a perfect capital? market, describe what you can do to undo the effect of this decision

What nucor information jumped out at you : What NUCOR information jumped out at you? - How does NUCOR's employee safety, health, & wellness programs support for the organization's strategy

Determine the correct rate for a 2-year loan to be made : Determine the correct rate for a 2-year loan to be made two years from now. If current implied Treasury effective annual spot rates are 1-year = 2%, 2-year = 3%

How you manage your anxieties feelings prejudices and biases : How did you manage your anxieties, feelings, prejudices, and biases? What assumptions did you make about people with mental illness?

What is the appeal of these companies for users : Have you used Uber or any other on-demand service companies? What is the appeal of these companies for users and providers?

Describe the barriers that the covid-19 pandemic has created : Discuss how the COVID-19 pandemic has influenced the healthcare safety and quality initiatives set forth in KSA's Vision 2030. Describe the barriers

What does hobbes mean by the right of nature : Describe Hobbes' state of nature? What are the conditions of life under it? What does Hobbes mean by the right of nature? What does he mean by a law of nature?

User Account

All Pages