ACC453 HW5

12. Treasury Bills (LO1, CFA2) A Treasury bill purchased in December 2016 has 55 days until maturity and a bank discount yield of 2.48 percent. What is the price of the bill as a percentage of face value? What is the bond equivalent yield?

Consider a US Treasury bill with one-year maturity and face value of $1,000 that sells for $900 today. Using this information, determine the yield to maturity for this discount bond. Yield to maturity (in percent, two decimal places) = Recall, interest rates on discount bonds are often quoted in terms of yield on a discount basis. For the sake of comparison, also determine the yield on a discount basis for this bond. Yield on a discount basis (in percent, two decimal places) =

Consider a bond without an expiration date that makes a fixed interest payment of $210 per year. Complete the following table by calculating the interest rate on the bond at different sale prices. (Hint: The effective interest rate on a bond is a ratio of the interest payment to the sale price of the bond times 100.) Price of Bond Interest Rate (Dollars) (Percent) 1,200   1,000   750   600     Use the blue points (circle symbol) and the preceding table to plot the relationship between bond prices and interest rates on the following graph. Note: Plot your points in the order in which you would like them connected. Line segments will connect the points automatically.   The line showing the relationship between bond prices and interest rates has a _____(POSITIVE/NEGATIVE)   slope; in other words, there is  _______(INVERSE / A DIRECT)  relationship between bond prices and interest rates.   NOTE- THIS QUESTION IS DIVIDED INTO SUBPARTS . PLEASE ANSWER…

The table below is the current balance sheet for the Maple Leafs Bank. Answer the following questions assuming that the bank's target reserve ratio is 10%. Assets (1) (2) Liabilities / Equity (1) (2) $120, еее $4 Demand deposits $ $900,000 Reserves Loans 680,000 Shareholders' equity 500,000 Securities 250,000 Fixed assets 350, 000 $1,400, өеө Total $1,400,000 Total a. This bank is (Click to select) v by $ b. Suppose that a loan, in the amount of the excess reserves found in part (a), is made to Sats Mundin. Show the resulting balance sheet in columns (1) in the table above. C. Suppose that Sats immediately spends all of his loan by writing a cheque to his psychologist, Freda Freud. She deposits it in her account, which happens to also be at the Maple Leafs Bank. The bank is now (Click to select) v by $ d. Suppose, instead, that the bank makes a loan for the amount in your answer in part (a), which then clears against the Maple Leafs Bank. Show the resulting balance sheet in columns (2)…

First America Bank's monthly payment charge on a 48-month, $19,000 loan is $508.26. The U.S. Bank's monthly payment fee is $517.70 for the same loan amount. What would be the APR for an auto loan for each of these banks? (Use Table 14.1.) Note: Round your final answers to the nearest hundredth percent. APR First America Bank between % and % U.S. Bank between % and %

G.222.

A zero-coupon bond is a bond that is sold for less than its face value (that is, it is discounted) and has no periodic interest payments. Instead, the bond is redeemed for its face value at maturity. Thus, in this sense, interest is paid at maturity. Suppose that a zero-coupon bond sells for $8,500 and can be redeemed in 20-years for its face value of $38,000. What is the annual compound rate of return? Annual compound rate = % (Round to two decimal places as needed.)

A treasury manager would like to develop a funds concentration policy for her staff to use to determine when to transfer funds using a wire transfer or an ACH transfer. The pertinent information appears below. Each wire costs $25 Each ACH transfer costs $0.75 Opportunity cost of funds is 5% Earnings credit rate is 1% Reserve requirement ratio is 10% For a mid-week transfer, what is the minimum transfer balance that justifies a wire transfer? For transfers made on Friday, what is the minimum transfer balance that justifies a wire transfer?

Sweden, one of the most technologically advanced nations on the planet, is paving its way to becoming the world's first cashless society by March 2023. By then, by March 24, 2023 to be precise, in Sweden, cash will no longer be accepted as a means of payment. In general, cash is already a no-go in Sweden. There is a unique law in Sweden that enables merchants to make customers pay electronically despite the status of cash as a legal tender. Sweden's culture of innovation and being early adopters of technology coupled with the nation's high-quality of life have played a paramount role in the transition.a. If this situation persists, how will the Demand/ Supply of Money in Sweden change and why? [Draw appropriate diagram to support your answer]b. How does the above event change the equilibrium condition of Money market in Sweden? [Draw appropriate diagram to support your answer]c. To increase the process of going cashless, if the Government of Sweden has decides to reduce the money…

Sweden, one of the most technologically advanced nations on the planet, is paving its way to becoming the world's first cashless society by March 2023. By then, by March 24, 2023 to be precise, in Sweden, cash will no longer be accepted as a means of payment. In general, cash is already a no-go in Sweden. There is a unique law in Sweden that enables merchants to make customers pay electronically despite the status of cash as a legal tender. Sweden's culture of innovation and being early adopters of technology coupled with the nation's high-quality of life have played a paramount role in the transition. If this situation persists, how will the Demand/ Supply of Money in Sweden change and why? [Draw appropriate diagram to support your answer] How does the above event change the equilibrium condition of Money market in Sweden? [Draw appropriate diagram to support your answer] To increase the process of going cashless, if the Government of Sweden has decides to reduce the money supply in…

If the face value of a 91-day Treasury Bill is £100000 and it is issued at a discount of £500, what is the annual interest rate (yield) that the purchaser receives (expressed as a percentage to 2 decimal places)? Answer the question by providing the appropriate number including decimal point in the box below (e.g. 1.23). Do not enter a comma, space, letters, words or symbols (such as %). Failure to follow these instructions will result in your answer being marked as incorrect. ( Previous page Next page > University PHILIPS

You are an investor currently holding 1.5 million U.S. dollars, and you are contemplating the following strategies. 1)Investing in the U.S. 5-year treasury bonds.2)Investing in the 5-year government bonds of one of the countries listed below. Your strategy is to exchange your funds on the spot market into the foreign currency, buy the local government bond, and after the bond’s maturity, exercise a forward to change your funds back into USD. Spot and forward rates are listed below. There are no put and call rates (the spread is equal to zero). The forward, however, costs 2% of the exchanged value.Required:1.Find the most profitable strategy. Calculate the future and present values of all 11 strategies (U.S. treasury bonds and 10 foreign government bonds).2.Explore the concept of arbitrage on the currency exchange markets and critically evaluate how it relates to this situation.

When you are 32, you win $20,000 in the lottery. You decide to spend half of your winnings immediately and place the other half in your retirement savings account (which is earning interest at 10% per year.  At 45 (after making the retirement account deposit), you decide to quit your job and take a two-year trip around the world. To help finance this trip, you withdraw 15% of the current balance in your retirement savings account.     What is the balance of your retirement savings account immediately after your withdrawal?

Treasury securities are issued and backed by the U.S. government and, therefore, are considered to be the lowest-risk securities on the market. As an investor looking for protection against inflation, you are considering the purchase of inflation-adjusted bonds known as U.S. Treasury Inflation-Protected Securities (TIPS). With these securities, the face value (which is paid at maturity) is regularly adjusted to account for inflation; however, the semiannual interest payment (called the bond dividend) remains the same. You purchased a 10-year $10,000 TIPS bond with dividend of 4% per year payable semiannually (i.e., $200 every 6 months). Assume there is no inflation adjustment for the first 5 years, but in years 6 through 10, the bond face value increases by $1200 each year. You use an expected investment return of 14.5% per year compounded semiannually. What will be the equivalent future worth of the total money received with dividend reinvestment included? The future worth of all the…

You plan to open a retirement account. Your employer will match 50% of your deposits up to a limit on the match of $2,500 per year. You believe the fund will earn 12% over the next 30 years, and you will make 30 deposits of $5,000, plus 50% employer matching, totaling $7,500 per year. a. How much money will be in the account immediately after the last deposit? b. How much total money will you put into the fund?

A large money center bank uses the US treasury yield curve to determine the appropriate level for its lending rates. To compensate for the costs of making a loan, the bank needs to charge 1.8% point more than the expected future interest rate on a Treasury security with the same maturity if it is to make a profit. The manager is considering a loan request from a customer seeking a one year loan that starts 2 years from today. If the two-year Treasury Strip rate is 4.1% and the three-year Treasury strip rate is 5.5%, at what minimum rate should the manager be willing to make the loan commitment?Enter your answer as a % to two decimal places. Assume the expectation theory of rates is valid and all liquidity premiums are zero.

Pacific Amalgamated (PA) issues a coupon bond that makes an interest payment (F) of €100 each year for five years and then repays the face value (V) of €1,000 at the end of that time. Assume the interest rate (i) is 2%. Which of the following formulas do investors need to use to determine the present value of P = € of this coupon bond? A single payment of the face value at maturity The sum of fixed payments The sum of fixed payments and a single payment of the face value at maturity Pacific Amalgamated (PA) issues 10-year bonds in 2017 with a €1,000 face value and a €50 coupon. The interest rate at which PA issues these bonds is When the bond reaches maturity in 2021, how much will each investor holding one of these PA bonds receive? The initial investment of €1,000 plus €500 worth of coupons (€50 per year x 10 years) €500 worth of coupons (€50 per year x 10 years) The initial investment of €1,000 plus €50 for the 10th coupon Assume interest rates rise dramatically. The market price of…

Figured in #2 is 120,448

Bank Three currently has $600 million in transaction deposits on its balance sheet. The Federal Reserve has currently set the reserve requirement at 10 percent of transaction deposits. (LG 4-3) If the Federal Reserve decreases the reserve requirement to 8 percent, show the balance sheet of Bank Three and the Federal Reserve System just before and after the full effect of the reserve requirement change. Assume Bank Three withdraws all excess reserves and gives out loans and that borrowers eventually return all of these funds to Bank Three in the form of transaction deposits. Redo part (a) using a 12 percent reserve requirement.

Use the formula: F = P (1 + i) 1. You wish to invest money now in order to have $600,000 after four years. How much do you need t deposit right now to reach your goal given an interest rate of: a. 0.5% per month? b. 1.8 % per quarter? 2. How long will an investment double itself if interest is earned at a compounded rate of: a. 3% per quarter? b. 0.25% per week (assumption: 1 year = 52 weeks)?

Use the ordinary interest method, 360 days, to solve the following word problem. Round to the nearest cent when necessary. Richie Powers is the owner of American Eagle Boats, a manufacturer of custom pleasure boats. Because of the economic recession and slow boat sales recently, American Eagle has begun accepting promissory notes from its dealers to help finance large orders. This morning American Eagle accepted a 90 day, 8.6% promissory note for $800,000 from one of its sales dealers. You are a manager for a bank, and Richie is one of your clients. Your bank's discount rate is currently 13%. Richie's goal is to discount the note as soon as possible, but not until the proceeds are at least equal to the face value of the note, $800,000. (a) As his banker, Richie has asked you to "run the numbers" at ten day intervals starting with day 20 and advise him as to when he can discount the note and still receive his $800,000. Find the bank discount (in $) for days 20, 30, and 40, and…

Suppose on your 21st birthday, your eccentric grandmother invites you to her house, takes you into her library, removes a black velvet painting of Elvis Presley from the wall, opens a hidden safe where she removes 50 crisp $100 bills, and hands them to you as a present, claiming you are her favorite grandchild. After thanking your grandmother profusely (and helping her rehang the picture of Elvis), you proceed to your bank and deposit half of your gift in your checking account and half in your savings account. How will these transactions affect M1 and M2? How will these transactions change M1 and M2 in the short run? What about the long run?”

Suppose that upon graduation you decide to buy a house in Riverside. You have $5,000 of cash savings that you can put for a down payment. Let’s ignore other fees and taxes. The fixed annual interest rate available for your 30 years mortgage loan is 4.0%. Given your disposable income, you are willing to make a monthly mortgage payment of up to $1,500 during the loan period. What would be the maximum price of a house you may look for? Show your calculation steps, assuming that your mortgage payments start right away.