Treasury inflation protected security

Assignment Help Operation Management

Reference no: EM13956215

Suppose the rate of return on a 10-year T-bond is currently 5.00% and that on a 10-year Treasury Inflation Protected Security (TIP) is 2.10%. Suppose further that the maturity risk premium on a 10-year T-bond is 0.9%, that no maturity risk premium is required on TIPs, and that no liquidity premiums are required on any T-bonds. Given this data, what is the expected rate of inflation over the next 10 years?

a) 1.80%

b) 2.00%

c) 1.90%

d) 2.10%

e) 2.20%

Please explain how you got your solution.

Reference no: EM13956215

Questions Cloud

What is the overall intrinsic value : Orwell Building Supply just paid a $2 dividend. The dividends are expected to grow at 30% for the first year, 25% for the second year, and then 15% for the third year. After which, the long-run rate is expected to be 6%. What is the expected dividend..

What is the current expected capital gains yield : Assuming we are in equilibrium conditions, what is the current expected divident yield? What is the expected stock price one year from now? What is the current expected capital gains yield?

Calculate the intrinsic value of a stock : Calculate the intrinsic value (current price) of a stock which just paid a dividend of $2. The dividends are expected to grow at 6% and the required return is 13%

What will the principal balance on the loan be : You take out a 30-year $300,000 mortgage loan with an APR of 8 percent and monthly payments. What are the monthly payments? In 16 years you decide to sell your house and payoff the mortgage. What will the principal balance on the loan be? What will y..

Treasury inflation protected security : Suppose the rate of return on a 10-year T-bond is currently 5.00% and that on a 10-year Treasury Inflation Protected Security (TIP) is 2.10%. Suppose further that the maturity risk premium on a 10-year T-bond is 0.9%, that no maturity risk premium is..

What is the net value of the payments vs. receipts : Carol Thomas will pay out $18,000 at the end of the year 2, $20,000 at the end of year 3, and receive $22,000 at the end of year 4. With an interest rate of 11 percent, what is the net value of the payments vs. receipts in today's dollars?

Explore horticultural programs at universities listed : Explore the horticultural programs at the universities listed below. Find the Web pages that provide information about the research being done at the university. See if any of them are doing research related to topics discussed in this class.

What is jarreds realized and recognized gain or loss on sale : In 2008 he replaced the entire roof for $12,000 and also paid $2,000 for repairs to the inside of the rental. Thus far, Jared deducted $18,440 for depreciation. What is Jarred's realized and recognized gain or loss on this sale?

What is the market-to-book ratio : Lemon Lymon, Inc., has a current stock price of $80. For the past year the company had net income of $7,400,000, total equity of $32,450,000, and 3.6 million shares of stock outstanding. What is the market-to-book ratio? Please show your work.

User Account

All Pages