Determine the yield on a treasury bond

Reference no: EM1373179

The market expects that inflation will be 3% each year for the next five years and then the following years will average 5% a year.

The maturity risk premium is estimated to be MRPt=0.1(t - 1)%. Maturity risk premium on a 2-year security is 0.1% or 0.001. Real risk-free rate of interest is 3 percent. Determine the yield on a Treasury bond that matures in twelve years?

Reference no: EM1373179

Questions Cloud

Question based on optimal portfolio : Assume that a risk averse individual has $1, and there are 3-assets; 1st safe, and 2nd risky. The safe one yields a sure rate of return of 1.

Corporate dividend policies : Here are many assertions about typical corporate dividend policies. Which of them are true? Write out a corrected version of any false statements.

Find the total risk of the portfolio : Two securities, Security A and Security B, with standard deviation of 30% and 40 percent, respectively. Compute the standard deviation of a portfolio weighted equally between two securitites if their correlation is;

Caluing business opportunities : Suppose that the role of finance section at Strident Marks. The finance section has a couple of new hires, and the CFO has asked that you spend a short amount of time with them,

Determine the yield on a treasury bond : The market expects that inflation will be 3% each year for the next five years and then the following years will average 5% a year.

Social security reform became law : Assume that the following Social Security reform became law; All current Social Security recipients will continue to earn their profits, but no increase will be made other than cost of living adjustments;

Undercover in a chicken factory : The attached article is about a field study in Arkansas. Discuss the cultural identity and the conditions of the newest wave of immigrants into the US and Arkansas.

Find market value of the bonds : The Bonds of Microfood, Inc. carry a 10 percent annual coupon, have a $1,000 face value, and nature in 4 years. Bonds of equivalent risk yield 7 percent.

Market portfolio using the capital market line : A portfolio that combines the risk-free asset and the market portfolio have an expected return of 25% and a standard deviation of 4%. The risk-free rate is 5%, and the expected return on the market portfolio is 20%.

User Account

All Pages