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Currently, yields to maturity on 1 year and 2 year us treasury securites are .602% and .852%. You can assume that for simplification purposes there are no coupon payments on these bonds and the yield to maturity is entirely due to the difference in face value and current market price of these securities.
a) If financial market investors were risk neutral, what would this data imply about market expectations of the yield on the 1 year bonds 1 year from now? Show your Calculations.
b) Given that financial market investors are risk averse, do you think actual market expectations differ slightly from your answer to (a). If so, how? Explain your answer.
On December 20, 1994 the Nippon Telegraph & Telephone Corporation (NTT) issued ¥1 billion of 10-year debentures due December 20, 2004. The debentures carried a 4 3/4% coupon. What was the yield to maturity of NTT’s debentures at the time of issuance?..
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The efficient markets hypothesis assumes all of the following except:
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While Steve Bouchard was a student at the University of Florida, he borrowed $12,000 in student loans at an annual interest rate of 9%. If Steve repays $1,500 per year, how long, to the nearest year, will it take him to repay the loan?
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