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1.Suppose the two-year spot rate in one year is 11.53% and the two-year spot rate in two years is 14.08%. Further assume that the liquidity preference theory holds and the liquidity premium is constant at 1%. What is the expected two-year forward rate in one year? And what is the expected two-year forward rate in two years? 2. A corporate bond paying a 10% coupon rate with semi-annual payments is currently selling at par. What interest rate would have to be offered on a bond (also selling at par) of similar risk that only paid annually to make you indifferent between the two bonds 3.Rank the following three debt securities in terms of lowest EFFECTIVE annual interest rate to largest. a. A one year zero paying 8% b. A one year corporate bond selling for par paying semi-annual payments with a (annual) coupon rate of 8% c. A three month treasury bill selling at $98,000 with a par value of Y$100,000. 4. You observe the following prices in the WSJ for zero coupon bonds Maturity (years) Price 1 952.38 2 890.00 3 816.30 a. Calculate the zero coupon spot rates that must accompany these bonds b. Calculate one year forward rates implied by this data, 1f2 and 2f3
Flotation costs of $30 per bond will be incurred in the process (which implies that f = 2.97%, or 0.0297 in decimal form) and the firm is in a 40% tax bracket.
What TVM concept (s) is represented in the situation? What is the value of the money represented by the situation? How did you arrive at the value?
Over the next two years, the real interest rate is expected to be 1.00 percent per year and the inflation premium is expected to be 0.30 percent per year. Calculate the maturity risk premium on the 2-year Treasury security.
What is their nominal yield to maturity? Round your answer to two decimal places.
Today, you want to sell a $1,000 face value zero coupon bond you currently own. The bond matures in 4.5 years. How much will you receive for your bond if the market yield to maturity is currently 5.33 percent? Ignore any accrued interest.
manufacturing overheadborealis manufacturing has just completed a major change in its quality control qc process.
Suppose that a fifteen year, $1,000 face value bond pays interest of $37.50 every 3 months. If you require a nominal annual rate of return of 12%, with quarterly compounding,
How is financial leverage created? Describe how the degree of financial leverage is calculated.
1. the present value of 100 to be received 10 years from today assuming an opportunity cost of 9 percent is . please
Your firm's weighted average cost of capital is 11 percent. You believe the company should make a particular investment, but the IRR of this investment is only 9 percent.
Broxholme industries has sales of 40million ,equity totaling 27.5 million and ros of 12% . the sustainable growth rate has been calcuated at 10.9% . what dividened payout ratio was assumed in this calcuation.
purple haze machine shop is considering a four-year project to improve its production efficiency. buying a new machine
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