2 What is the basis point spread (in Bips) between: + Years to Maturity Treasury Yield AA-Rated Bond Yield 1 5.50% 6.70% 2 5.67% 6.89% 5.82% 7.06% 5.90% 7.17% 6.08% 7.38% 6.20% 7.53% 6.30% 7.65% 6.50% 7,88% 3 4 5 6 7 5 Year Treasury and a 5 Year BBB-Rated Bond 10 Year Treasury an a 10 Year AA-Rated Bond Yield 8 BBB-Rated Bond Yield 7.40% 7.61% 7.79% 7.92% 8.14% 8.30% 8.44%

2 What is the basis point spread (in Bips) between: + Years to Maturity Treasury Yield AA-Rated Bond Yield 1 5.50% 6.70% 2 5.67% 6.89% 5.82% 7.06% 5.90% 7.17% 6.08% 7.38% 6.20% 7.53% 6.30% 7.65% 6.50% 7,88% 3 4 5 6 7 5 Year Treasury and a 5 Year BBB-Rated Bond 10 Year Treasury an a 10 Year AA-Rated Bond Yield 8 BBB-Rated Bond Yield 7.40% 7.61% 7.79% 7.92% 8.14% 8.30% 8.44%

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Assume the risk-free rate on long-term Treasury bonds is 6.04%. Assume also that the average annual return on the Winslow 5000 is 11% as the expected return on the market. Use the SML equation (i.e., CAPM) to calculate the two companies' required returns. Bartman Industries Reynolds Inc. Year Stock Price Dividend Holding period return Stock Price Dividend Holding period return 2020 $17.25 $1.15 $48.75 $3.00 2019 14.75 1.06 52.30 2.90 2018 16.50 1.00 48.75 2.75 2017 10.75 0.95 57.25 2.50 2016 11.37 0.90 60.00 2.25 2015 7.62 55.75
II. Show your solution 1. For each of the following Treasury Bills, calculate the discount basis yield and the investment yield: T-Bill Maturity Price per $100 Discount Yield Investment Yield A 128-day 97.9323 B 91-day 98.7312 C 28-day 96.8931 D 182-day 99.1236 E 91-day 95.7821
B. J. Gautney Enterprises is evaluating a security. One-year Treasury bills are currently paying 2.9 percent. Calculate the investment's expected return and its standard deviation. Should Gautney invest in this security? Probability Return0.15 -3%0.30 2%0.40 4%0.15 6% The investment's standard deviation is _______ % . round to two decimal places
One-year Treasury securities yield 5%, 2-year Treasury securities yield 5.3%, and 3-year Treasury securities yield 6%. Assume that the expectations theory holds. What does the market expect will be the yield on 1-year Treasury securities two years from now? 8.50% 7.41% 6.51% 7.01% 8.01%
Question 7 The Amelia Knight investment fund has a total capital of R120 000 invested in three shares: SharesReturnInvestedTechnological Sector25%R60 000Education Sector13%R30 000Mining Sector20%R30 000 The current risk-free rate is 5,5%. Market returns have the following estimated probability distribution for the next period: ProbabilityMarket return0,3–10%0,1 14%0,2 15%0,4 18% What is the beta coefficient of the investment fund? 1. 0,52 2. 0,80 3. 1,82 4. 4,92
Given a yield to maturity of 0.00045629%. Assume the yield to maturity immediately increases 1%. Calculate the new price of the Treasury Bill. Show Work Please.
1. (Yield curve) If yields on Treasury securities were currently as follows: Term Yield 6 months 1.00% 1 year 1.70% 2 years 2.10% 3 years 2.40% 4 years 2.70% 5 years 2.90% 10 years 3.50% 15 years 3.90% 20 years 4.00% 30 years 4.10% a. Plot the yield curve.b. Explain this yield curve using the unbiased expectations theory and the liquidity preference theory
4 - Based on economistsAc€?c forecasts and analysis, 1-year Treasury bill rates and liquidity premiums for the next four years are expected to be as follows: R1 = .90% E(2r1) = 2.05% L2 = 0.09% E(3r1) = 2.15% L3 = 0.12% E(4r1) = 2.45% L4 = 0.14% Using the liquidity premium theory, plot the current yield curve. Make sure you label the axes on the graph and identify the four annual rates on the curve both on the axes and on the yield curve itself. (Do not round intermediate calculations. Round your answers to 2 decimal places.) Year Current (Long-term) Rates 1 % 2 % 3 % 4 % 6 - On March 11, 20XX, the existing or current (spot) 1-, 2-, 3-, and 4-year zero coupon Treasury security rates were as follows: 1R1 = 0.90%, 1R2 = 1.50%, 1R3 = 1.90%, 1R4 = 2.05% Using the unbiased…
Currently, 3-year Treasury securities yield8.7%,7-year Treasury securities yield8.4%, and 10 -year Treasury securities yield8.2%. If the expectations theory is correct, what does the market expect will be the yield on 3-year Treasury securities seven years from today? 8.13%8.33%7.73%7.53%7.93%
One-year Treasury securities yield 4.85%. The market anticipatesthat 1 year from now, 1-year Treasury securities will yield 5.2%. If the pure expectationstheory is correct, what is the yield today for 2-year Treasury securities? Calculate the yieldusing a geometric average.
31. Suppose the index in the previous example has a value of 998 after 90 days. What is the value of a long position in the index forward contract, assuming a 5.23% continuously compounded risk-free rate and a 2.167% continuously compounded dividend yield? a) –Php87.629109 b) Php87.629109 c) Php93.414429 d) –Php93.414429 32. What is the price of a 1 x 4 FRA when the current 30-day LIBOR is 5.15% and the 100-day LIBOR is 5.85%? a) 6.124% b) 1.625% c) 0.23% d) 6.052% 33. Continuing with the previous problem for a 1 x 4 FRA, assume a notional principal of Php2 million and that the 70-day rate has climbed to 6.5%, which is higher than the contract rate determined in the previous problem. What is the value of FRA at maturity? a) Php1,462.2222 b) Php1,443.97202 c) Php49,093.333 d) Php48,480.5925
Two-year Treasury securities yield 6.7 percent, while 1-year Treasury securities yield 6.3 percent. Assume that the maturity risk premium (MRP) equals zero. What does the market anticipate will be the yield on 1-year Treasury securities one year from now?

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