Real rate of interest on short-term treasury bills

Assignment Help Financial Management
Reference no: EM13806654

You observe that the current interest rate on short-term U.S. Treasury bills is 4.23 percent. You also read in the newspaper that the GDP deflator, which is a common macroeconomic indicator used by market analysts to gauge the inflation rate, currently implies that inflation is 1.2 percent. What is the approximate real rate of interest on short-term Treasury bills? (Enter your answer as a percent rounded to 2 decimal places. Omit the "%" sign in your response.)

Approximate real rate   %

Reference no: EM13806654

Questions Cloud

The amount available for distribution to all claimants : Duchon Industries had the following balance sheet at the time it defaulted on its interest payments and filed for liquidation under Chapter 7. Sale of the fixed assets, which were pledged as collateral to the mortgage bondholders, brought in $900 mil..
Retirement plan-what is rate of return on total invested : A publicly traded consulting engineering firm has a retirement plan wherein the company will match an employee’s stock purchases up to $ 5,000 per year, provided the employee has been with the firm for at least 10 years. If an employee hired 10 years..
Saving for retirement : A smart engineer started saving for her retirement 10 years ago. She saved $12,000 each year through the present time. If she has invested in a stock fund that averaged a 15% rate of return over that period, and she expects to make the same annual in..
Should wolfson lease machine or buy it with bank financing : Wolfson Corporation has decided to purchase a new machine that costs $3.2 million. The machine will be depreciated on a straight-line basis and will be worthless after four years. The corporate tax rate is 35 percent. Should Wolfson lease the machine..
Real rate of interest on short-term treasury bills : You observe that the current interest rate on short-term U.S. Treasury bills is 4.23 percent. You also read in the newspaper that the GDP deflator, which is a common macroeconomic indicator used by market analysts to gauge the inflation rate, current..
Calculate the return on invested capital for each firm : Firms HL and LL are identical except for their leverage ratios and the interest rates they pay on debt. Each has $15 million in invested capital, has $2.25 million of EBIT, and is in the 40% federal-plus-state tax bracket. Calculate the rate of retur..
What is the bond equivalent yield : A U.S. Treasury bill with 89 days to maturity is quoted at a discount yield of 4.17 percent. What is the bond equivalent yield?
Maximum initial cost the company would be willing to pay : Och, Inc., is considering a project that will result in initial after tax cash savings of $1.74 million at the end of the first year, and these savings will grow at a rate of 1 percent per year indefinitely. The firm has a target debt-equity ratio of..
Yield to maturity-value of bond : A $1,000 par value 10-year bond with a 10 percent coupon rate recently sold for $900. The yield to maturity is:

Reviews

Write a Review

 

Financial Management Questions & Answers

  New machine which will reduce manufacturing costs

Mars, Inc. is considering the purchase of a new machine which will reduce manufacturing costs by $5,000 annually. The company will depreciate the cost of the new machine using the straight line method over the project life and it expects to sell the ..

  Determine v-s-rs and wacc for firms u and l

Assume that Firms U and L are in the same risk class and that both have EBIT = $500,000. Firm U uses no debt financing, and its cost of equity is rsu = 14%. Firm L has $1 million of debt outstanding at a cost rd =8%.

  Linear regression for projecting next years sales

If the sales data from 2009-2013 had been 1024, 1499, 1589, 1823, and 1950 using linear regression - what would the projected sales figure for 2014 be? What assumption is made when you use Linear Regression for projecting next year's sales? Is this a..

  Overview of financial management

Overview of Financial Management

  What is the impact on your recommendation of the fact

What is the impact on your recommendation of the fact that the operating cash inflows associated with Press A are characterized as very risky in contrast to the low-risk operating cash inflows of Press B?

  Which ratios would a banker be most interested in when

Which ratios would a banker be most interested in when considering whether to approve an application for a short-term business loan? Explain.

  Find the firms debt ratio

Given the following information for the Duke Tire Company, find the firm's debt ratio (i.e., total liabilities / total assets): ROE (N/E) = 0.24 (expressed as a decimal)

  Statements relating to market efficiency and current ratio

Which of the following statements relating to Market Efficiency is most correct?  Which of the following transactions would decrease a firm’s Current Ratio?

  What is the projects NPV

A project has an initial cost of $41,125, expected net cash inflows of $12,000 per year for 9 years, and a cost of capital of 14%. What is the project's NPV? (Hint: Begin by constructing a time line.) Do not round your intermediate calculations. Roun..

  Considering the purchase of crown bakery

You are considering the purchase of crown bakery, inc common stock that just paid a dividend of $3.77 per share. You expect the dividend to grow at a rate of 3.28 percent per year, indefinitely. You estimate that a required rate of return of 10.25 pe..

  Calculate vintages return on equity

Vintage, Inc. has a total asset turnover of 3.09 and a net profit margin of 24.91 percent. The total asset to equity ratio for the firm is 1.97. Calculate Vintage’s return on equity

  Environment issues in context of legal framework and ethics

Describe the fundamental concepts of investing covering basic supply and demand analysis, economic life cycle theory, time value of money, risk and return, market liquidity, diversification and asset allocation in an investment portfolio where app..

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