Suppose that actual inflation is 3 percent, the Fed's inflation target is 2.5 percentage points, and unemployment rate is 2.5 (which is 15 percent below the Fed's full-employment target of 4 percent). According to the Taylor Rule, what value will the Fed want to set for its targeted interest rate? Instructions: Enter your answer rounded to 1 decimal place. percent

Suppose that actual inflation is 3 percent, the Fed's inflation target is 2.5 percentage points, and unemployment rate is 2.5 (which is 15 percent below the Fed's full-employment target of 4 percent). According to the Taylor Rule, what value will the Fed want to set for its targeted interest rate? Instructions: Enter your answer rounded to 1 decimal place. percent

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter22: International Financial Management

Section: Chapter Questions

Problem 2P

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You observe that the current interest rate on short-term U.S. Treasury bills is 4.86 percent. You also read in the newspaper that the GDP deflator, which is a common macroeconomic indicator used by market analysts to gauge the inflation rate, currently implies that inflation is 1.65 percent. What is the approximate real rate of interest on short-term Treasury bills? (Enter your answer as a percent rounded to 2 decimal places.)
You observe that the inflation rate in the USA is 2 percent per year and that T-bills curently yeild 2.5 percent annually. Use the approximate international fisher effect equation in your calculations. a. What do you estimate the inflation rate to be in Austraila, if short-term Austrailian government securities yeild 5 percent per year? Do not round intermediate calculations and enter your answer as a percent rounded to 1 decimal place e.g. 32.1. b. What do you estimate the inflation rate to be in Canada, if short-term canadian government securities yeild 8 percent per year? Do not round intermediate calculations as mentioned above. C. What do you estimate the inflation rate to be in Taiwaan , if short-term government securities yeild 10 percent per year?
Consider the following table for an eight-year period: Year T-bill return Inflation 1 7.47 % 8.53 % 2 8.94 12.16 3 6.05 6.76 4 5.97 5.04 5 5.63 6.52 6 8.54 8.84 7 10.74 13.11 8 13.00 12.34 Calculate the average return for Treasury bills and the average annual inflation rate (consumer price index) for this period. (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) Average return for Treasury bills % Average annual inflation rate % Calculate the standard deviation of Treasury bill returns and inflation over this time period. (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) Standard deviation of Treasury bills % Standard deviation of inflation % Calculate the real return for each year. (A negative answer should be indicated by a minus sign. Leave no cells…
Suppose we have the following Treasury bill returns and inflation rates over an eight year period: Year Treasury Bills Inflation 1 10.45% 12.55% 2 11.36 16.00 3 9.06 10.29 4 8.34 7.97 5 8.88 10.29 6 11.23 12.77 7 14.11 16.98 8 15.97 16.90 a. Calculate the average return for Treasury bills and the average annual inflation rate for this period. (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) Treasury bills % Inflation % b. Calculate the standard deviation of Treasury bill returns and inflation over this period. (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) Treasury bills % Inflation %…
For this question, the inflation rates are actual inflation levels ( so a 6-month inflation rate increase of 3% increases par by 3%, not 1.5%.) You have a semiannual treasury inflation protected security, which is 1000 par and sells at par, with a 4% coupon rate. If the inflation rates are: 2% for the first 6 months and then 0.4% for the second, 1% for the third and 0% for the fourth 6 months, find: -the individual nominal payments made for each time period Report the total amount paid including par (all coupons and par, total dollar value) (do not use $ in the answer) Note: Correct answer is 1,116.5752. Please explain and show step by step?
The real rate is 4 percent and the inflation rate is 5.6 percent. What rate would you expect to see on a Treasury bill? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
Note: For this question, the inflation rates are actual inflation levels (so a 6-month inflation rate increase of 3% increases par by 3%, not 1.5%.) You have a semiannual Treasury inflation-protected security, which is 1000 par and sells at par, with a 4% coupon rate. If the inflation rates are: 1% for the first 6 months and then 1.9% for the second, 0% for the third, and 1% for the fourth 6 months, find: -the individual nominal payments made for each time period Report the total amount paid including par (all coupons and par, total dollar value)
Suppose we observe the 3-year Treasury security rate (1R3) to be 8 percent, the expected 1-year rate next year—E(2r1)—to be 4 percent, and the expected one-year rate the following year—E(3r1)—to be 6 percent. If the unbiased expectations theory of the term structure of interest rates holds, what is the 1-year Treasury security rate, 1R1? (Round your answer to 2 decimal places.)
The market has an expected rate of return of 8.0 percent. The long-term government bond is expected to yield 4.8 percent and the U.S. Treasury bill is expected to yield 1.1 percent. The inflation rate is 3.2 percent. What is the market risk premium? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
If Treasury bills are currently paying 3.05 percent and the inflation rate is 1.89 percent, what is the approximate real rate of interest? The exact real rate? Can the calculator and excel solution be provided?
In the United Kingdom, the inflation rate is 1.8 per cent per year and that T-bills currently yield 2.1 per cent annually. What do you estimate the inflation rate to be in Australia if short-term Australian government securities yield 4 per cent per year?
Suppose the real rate is 3.3 percent and the inflation rate is 2.4 percent. What rate would you expect to see on a Treasury bill? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)