Expectations hypothesis of term structure of interest rates

Assignment Help Financial Management

Reference no: EM131906515

1. A coupon bond that pays interest of $40 annually, has a par value of $1,000, matures in 5 years, and is selling today at a price of $840.29. The yield to maturity on this bond is __________.

A) 5%

B) 6%

C) 7%

D) 8%

2. A callable bond pays annual interest of $60, has a par value of $1,000, matures in 20 years but is callable in 10 years at a price of $1,100, and has a value today of $1055.84.

The yield to call on this bond is __________.

A) 6.00%

B) 6.58%

C) 7.20%

D) 8.00%

3. A coupon bond pays semi-annual interest is reported as having a price quotation of 117% of its $1,000 par value. If the last interest payment was made 2 months ago and the coupon rate is 6%, the invoice price of the bond will be __________. (Assume 1 month = 30 days for this problem)

A) $1,140

B) $1,170

C) $1,180

D) $1,200

4. You purchased a 5-year annual interest coupon bond one year ago. Its coupon interest rate was 6% and its par value was $1,000. At the time you purchased the bond, the yield to maturity was 4%. If you sold the bond immediately after receiving the first interest payment and the bond's yield to maturity had changed to 3%, your annual total rate of return on holding the bond for that year would have been approximately_____.

A) 5.0%

B) 5.5%

C) 7.6%

D) 9.0%

5. We observe that the slope of yield curve is negative (downward sloping). According to the pure expectations hypothesis of the term structure of interest rates, this is an indication that __________.

A) short term interest rate is expected to rise in the future

B) long term interest rate is expected to rise in the future

C) short term interest rate is expected to fall in the future

D) long term interest rate is expected to fall in the future

Reference no: EM131906515

Questions Cloud

Standard reduction potentials : Here are two standard reduction potentials: HCO2- + 2 H2O + 2 e- ? HCHO + 3 OH-E°= -1.07 HCO2H + 2 H3O+ + 2 e- ? HCHO + 3 H2OE°= -0.01

Compounded daily on savings accounts : Bucher Credit Bank is offering 6.5 percent compounded daily on its savings accounts. How much will you have in the account in 5 years?

Respond to all colleagues postings : Respond to all of my colleagues' postings in one or more of the following ways: Provide an alternative or additional implication of your colleague's insights.

Calculate the ph after mole : Calculate the pH after 0.14 mole of NaOH is added to 1.08 L of a solution that is 0.49 M HC3H5O3 and 1.24 M NaC3H5O3

Expectations hypothesis of term structure of interest rates : We observe that the slope of yield curve is negative (downward sloping). According to the pure expectations hypothesis of the term structure of interest rates,

Standard reduction potentials : From the standard reduction potentials, identify reaction pair that is candidate for batteries that would produce more than 5 V of electrical potential

Demonstrate the financial health of a health care setting : How are financial statements used to demonstrate the financial health of a health care setting? Select three key terms from the chapters.

Litmus for a litmus test : If the product of the reaction were dissolved in water, what would be the color of the litmus for a litmus test? Explain. What is the product?

Nuclear equation and of a chemical equation : An example of a nuclear equation and of a chemical equation. In what ways are the two equations alike? Different?

User Account

All Pages