Determinants of Interest Rates

Suppose you and most other investors expect the inflation rate to be 7% next year, to fall to 5% during the following year, and then to remain at a rate of 3% thereafter. Assume that the real risk-free rate, r*, will remain at 2% and that maturity risk premiums on Treasury securities rise from zero on very short-term securities (those that mature in a few days) to a level of 0.2 percentage points for 1-year securities. Furthermore, maturity risk premiums increase 0.2 percentage points for each year to maturity, up to a limit of 1.0 percentage point on 5-year or longer-term T-notes and T-bonds.

Calculate the interest rate on 1-year Treasury securities. Round your answer to two decimal places.

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Calculate the interest rate on 2-year Treasury securities. Round your answer to two decimal places.

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Calculate the interest rate on 3-year Treasury securities. Round your answer to two decimal places.

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Calculate the interest rate on 4-year Treasury securities. Round your answer to two decimal places.

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Calculate the interest rate on 5-year Treasury securities. Round your answer to two decimal places.

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Calculate the interest rate on 10-year Treasury securities. Round your answer to two decimal places.

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Calculate the interest rate on 20-year Treasury securities. Round your answer to two decimal places.

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Making equal monthly deposits into your account : You are planning to retire and have decided: you will retire in 33 years and would like to have $7,000 per month as retirement income for 30 years of retirement. How much will you need to have when you retire to be able to withdraw the desired $7,000.. |

What is the amount of each interest payment : The semiannual, 8-year bonds of Alto Music are selling at par and have an effective annual yield of 8.6285 percent. What is the amount of each interest payment if the face value of the bonds is $1,000? Format to 6 decimal places. |

What is the current yield and yield to maturity : BMW issued 20 year $1,000 bonds in 2014 with an annual coupon rate of 7.45%. In 2016 after the coupon for 2016 is paid, that bond can be purchased for $1,285. If you bought this bond, what is the current yield and yield to maturity? |

Expected return on the portfolio : A portfolio is entirely invested into Bruno's Gold Mining Equity, which is expected to return 18%, and Alfred's Inc. bonds, which are expected to return 6%. Three quarters of the funds are invested in Bruno's and the rest in Alfred's. What is the exp.. |

Determinants of interest rates : Suppose you and most other investors expect the inflation rate to be 7% next year, to fall to 5% during the following year, and then to remain at a rate of 3% thereafter. Calculate the interest rate on 2-year Treasury securities. Calculate the intere.. |

Find the monthly payment-the future value : The term of the loan is 10 years, you will make monthly payments, and the interest rate is 4% annual compounded monthly. Find the monthly payment, the future value, and the annual effective rate. |

Bonds issued-what is the yield to maturity : The bonds issued by Stainless Tubs bear a 6 percent coupon, payable semiannually. The bonds mature in 11 years and have a $1,000 face value. Currently, the bonds sell for $989. What is the yield to maturity? |

The outstanding bonds of winter time products : The outstanding bonds of Winter Time Products provide a real rate of return of 3.90 percent. The current rate of inflation is 2.20 percent. What is the nominal rate of return on these bonds? |

Who earns the return on the investment : You run a company, GizmoNet, that produces gizmos. Gizmos hook onto Nintendo Game Boys (hand-held electronic game players), allowing users to access the Internet using wireless communication protocols. Thus, they turn Game Boys into hand-held web bro.. |

## Calculate the payback period for a combine purchasedCalculate the payback period for a combine purchased for $250,000 if it adds an estimated $40,000 to your net cash flows in harvesting expense savings for the next 4 years, $30,000 per year for years 5 through 8, and has a salvage value of $20,000 at.. |

## Prepare an amortization schedule for a three-year loanPrepare an amortization schedule for a three-year loan of $111,000. The interest rate is 10 percent per year, and the loan calls for equal annual payments. How much total interest is paid over the life of the loan? |

## What was the total value of the account at the endAt time =0 an engineer deposited $10000 into an account that pays interest at 8% per year,, compounded semi annually. If she withdrew $1000 in months 2,11, and 23, what was the total value of the account at the end of 3 years? Assume NO inter period .. |

## What must the expected return on the market beA stock has an expected return of 10.2 percent, its beta is 1.03, and the risk-free rate is 6.40 percent. What must the expected return on the market be? |

## The principal repayment portionYou plan to purchase a $ 250,000 house using a 15-year mortgage obtained from your local bank. The mortgage rate offered to you is 3.75%. You will make a down payment of 20% of th epurchase price. Which of the following is correct? The principal repa.. |

## Golbal remitence case-financial account componentsWhere are remittances across borders included within the balance of payments? Are they current or financial account components? Under what conditions are remittances significant contributors to the economy and overall balance of payments? What role d.. |

## What is the default risk premium on the corporate bondA Treasury bond that matures in 10 years has a yield of 5.75%. A 10-year corporate bond has a yield of 8.75%. Assume that the liquidity premium on the corporate bond is 0.35%. What is the default risk premium on the corporate bond? |

## Annualized implied repo rate on treasury bond spreadDetermine the annualized implied repo rate on a Treasury bond spread in which the March is bought at 60 and the June is sold at 61.5. The March CF is 1.1 and the June CF is 1.14. The accrued interest as of March 1 is 1.15 and the accrued interest as .. |

## What is a private equity firmWhat is the agency problem between stockholders and managers and describe the data used by the researcher in the analysis. |

## What is the weight for the equity-cost of equityA firm has 2,000,000 shares of common stock outstanding with a market price of $3.00 per share and a book value of $2.25 per share. It has 3,000 bonds outstanding, quoted at 90 percent of par. The bonds mature in 15 years, have a coupon rate of 10% a.. |

## What other factor is affected by increased economic growthWhat other factor is likely to be affected by increased economic growth and could place upward pressure on the value of the local currency? |

## Interest rates vary with the investment horizonWhen we refer to the "risk-free interest rate," we mean the rate on U.S. Treasuries. Interest rates vary with the investment horizon. All borrowers, besides the U.S. Treasury, have some risk of default. |

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