Reference no: EM1333644
1) Assume investors expect a 2.0 percent real rate of return over the next year. If inflation is expected to be 0.5 percent, what is the expected nominal interest rate for a one-year U.S. Treasury security?
2) A thirty-year U.S. Treasury bond has a 4.0 percent interest rate. In contrast, a ten-year Treasury bond has an interest rate of 3.7 percent. If inflation is expected to average 1.5 percentage points over both the next ten years and thirty years, determine the maturity risk premium for the thirty-year bond over the ten-year bond.
3) You are considering an investment in a one-year government debt security with a yield of 5 percent or a highly liquid corporate debt security with a yield of 6.5 percent. The expected inflation rate for the next year is expected to be 2.5 percent.
a. What would be your real rate earned on either of the two investments?
b. What would be the default risk premium on the corporate debt security?
4) A Treasury note with a maturity of four years carries a nominal rate of interest of 10 percent. In contrast, an eight-year Treasury bond has a yield of 8 percent.
a. If inflation is expected to average 7 percent over the first four years, what is the expected real rate of interest?
b. If the inflation rate is expected to be 5 percent for the first year, calculate the average annual rate of inflation for years 2 through 4.
c. If the maturity risk premium is expected to be zero between the two Treasury securities, what will be the average annual inflation rate expected over years 5 through 8?
|
Determining real and nominal gdp
: Research and identify the current levels of the real and nominal GDP, unemployment rate, the inflation rate and the key interest rate. Relate these variables to the current state of the economy.
|
|
Discuss the bp''s approach
: Discuss the ways that BP's approach to teams may have contributed to the 2010 Deepwater Horizon oil spill.
|
|
Illustrate what are the limits to long-term economic
: Illustrate what are the limits to long-term economic growth in the US.
|
|
Concept of due process
: Describe the process after a crime has been committed through post-arrest procedures
|
|
Real rate of return-expected nominal interest rate
: Suppose investors expect the 2.0 percent real rate of return over the next year. If inflation is expected to be 0.5 percent, find out the expected nominal interest rate for a one-year U.S. Treasury security?
|
|
Job analysis relevant to hrm
: Why is job analysis relevant to human resource management activities such as planning, staffing, training, performance appraisal, reward systems and labor relations?
|
|
Explain ebusiness versus physical shopping
: Explain EBusiness versus Physical Shopping and explain how the supply chain was modified from brick and mortar
|
|
Elucidate why intermediate goods and services included
: Elucidate why intermediate goods and services usually are not included directly in GDP. Are there any circumstances under which they would be included directly.
|
|
Role of government, business in environmental protection
: Discuss the roles of government, business, and the consumer in environmental protection.
|