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According to the pure expectations theory of interest rates, you expect to pay $98.08 for a one-year STRIPS on February 15, 2011. With a one year rate of 1.95%, what is the corresponding implied forward rate? How does your answer compare to the current yield on a one-year STRIPS? What does this tell you about the relationship between implied forward rates, the shape of the zero coupon yield curve, and market expectations about future spot interest rates? Show your work, as to prove understanding of the required concepts and formulas.
As reported by the Bureau of Labor Statistics, the CPI for Airfare in 2263 was 583.9 (using a base year of 1914 = 100). The CPI for Airfare in 2264 was 615.8. Based on this data, what was the inflation rate of airfare from 2263 to 2264?
Explain the relationship observed between ratings and yield to maturity - Explain why the coupon rate and the yield to maturity determine why the bonds would trade at a discount, premium, or par.
Suppose the spot price for Euro is $1.15, the futures price for delivery in 6 months is $1.1471286. Assume that the 6 month borrowing/lending rate in Euro is 0.75percent (annually, continuous compounding) and the corresponding rate in $ is 0.25percen..
You have received a significant amount of information and multiple projects to evaluate to hone your skills. What are the criticisms of the payback period?
Suppose the 0.5-year zero rate is 6% and the 1-year zero rate is 8%. Consider a 1-year, plain vanilla, semi-annual pay, fixed-for-floating interest rate swap. What is the swap rate that will make this swap worth zero? What is the dollar duration of $..
The project is to study the changing trends of the Indian Markets due to the foreign investments, in particular FIIs, its impact, being the single largest investor class in the Indian Markets with respect to current issues.
A 4.85 percent coupon municipal bond has 22 years left to maturity and has a price quote of 103.70. The bond can be called in eight years. The call premium is one year of coupon payments. Compute the bond’s current yield. Compute the yield to call.
Summarize call provisions and sinking fund provisions. Explain how these types of provisions individually make bonds more or less risky for a) an investor, and b) the issuer.
The Starr Co. just paid a dividend of $1.30 per share on its stock. What will the stock price be in three years? What is the current stock price?
Byron Books, Inc. recently reported $9,545,882 in net income. The firm's EBIT was $22,866,672, and its tax rate was 35%. What is the firm's interest expense?
If she rebalances her portfolio to keep the same expected return but reduce her exposure to inflation to zero (i.e., bp2 = 0), what will its sensitivity to the first factor become?
The closest approximation to the real, risk-free rate of interest is
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