What is the risk premium for 18 month bonds

Assignment Help Finance Basics
Reference no: EM132638413

Assume that the preferred habitat theory holds and that the one-year spot rate is 5.50% per annum nominal and that the 18-month spot rate is 5.25% per annum nominal. Assuming that investors have a preferred investment horizon of 18 months and semi-annual compounding and that the expected six-month rate in one year's time is 5.00% per annum nominal, what is the risk premium for 18 month bonds?

Reference no: EM132638413

Questions Cloud

Prepare general journal entry : Prepare General Journal entry, T accounts, trial balance, INCOME STATENT AND BALANCE SHEET from the following transactions
Implementing ERM in higher education environment : Discussion and case study on implementing ERM in a higher education environment.
Coors Improves Beer Flavors with Neural Networks : Why is beer flavor important to Coors' profitability? What is the objective of the neural network used at Coors?
Do you agree or disagree with this proposition : Do you agree or disagree with this proposition? Why or Why not (Personal experiences or examples welcomed as part of your answer)
What is the risk premium for 18 month bonds : Assume that the preferred habitat theory holds and that the one-year spot rate is 5.50% per annum nominal and that the 18-month
Explain percentage increase in the price of bond : Assume that the yield curve is currently flat at 13.5% pa nominal. Based on exact bond pricing, if interest rates decrease
Find modified duration of portfolio : Assume you have a portfolio comprising 4 zero-coupon bonds that have 3 years to maturity and 6 zero-coupon bond with a maturity
Find percentage increase in the price of bond : Based on exact bond pricing, if interest rates decrease by 100 basis points at all maturities, what is the percentage increase in the price of this bond?
Determine the effect of the errors on retained earnings : The internal audit of a company discover that ending inventories for 2019 and 2021 were overstated by 200,000 and 500,00, Determine the effect of the errors

Reviews

Write a Review

Finance Basics Questions & Answers

  Generate a set of appropriate dimensionless groups

By dimensional analysis, generate a set of appropriate dimensionless groups.

  Finding the arithmetic mean of returns

Assume you know that someone invested $1,500 in the Ec140 mutual fund 10-years ago, Now you learn that their balance in the fund has increase to $9,245.

  Calculate to two decimal points

Calculate to two decimal points using the following formula: PV = [{FCF / (WACC - g)} - total debt] / common shares

  Which one of the following bonds is the least suitable

Mary is a retired widow who is financially dependent upon the interest income produced by her bond portfolio. Which one of the following bonds is the least suitable for her to own?

  What are the payments on the loans

Assume S&S takes out a bullet loan under the terms described. What are the payments on the loans?

  Indicate a favorable response from consumers

Cola Inc. has thus far spent $500,000 in test marketing this drink. The test marketing results indicate a favorable response from consumers.

  Features eight types of skis-six types of bindings

A local ski sale features eight types of skis, six types of bindings, and seven types of boots. How many different ski/binding/boot packages are available?

  How could you use swaptions to restructure the debt

How could you use swaptions to restructure the debt? Explain what happens assuming two subsequent future possibilities: rates going up and rates going down.

  What is the personal tax rate on debt

If the expected after-tax cash flows to the debt holders, as a group, is the same as the expected after-tax cash flows to the equity holders, as a group, what is the personal tax rate on debt?

  Norwood corp currently has accounts receivable of 1223675

norwood corp. currently has accounts receivable of 1223675 on net sales of 6216900. what are its accounts receivable

  Why tiebout model solve problems with preference revelation

Why does the Tiebout model solve the problems with preference revelation that are present with Lindahl pricing?

  What is the accounts receivable period

What is the Accounts Receivable Period (AR Period)? That is, what is the Average Collection Period (ACP)?

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd