* The 1-year spot rate is 8%p.a. effective. The term structure of 1-year effective forward rates is as follows: at time t = 1 the rate is 7%, at time t = 2 the rate is 6%, at time t = 3 the rate is 5%. (a) Determine the term structure of spot rates. (b) A fixed income security pays £10 annual coupons and it is redeemed after 4 years for £100. Compute its price at time t = 0.
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- The 1-year spot rate is 8%p.a. effective. The term structure of 1-year effective forwardratesisasfollows: attimet=1therateis7%,attimet=2therate is 6%, at time t = 3 the rate is 5%. (a) Determine the term structure of spot rates. (b) A fixed income security pays £10 annual coupons and it is redeemed after 4 years for £100. Compute its price at time t = 0.An investment pays $2,100 per year for the first 7 years, $4,200 per year for the next 7 years, and $6,300 per year the following 8 years (all payments are at the end of each year). If the discount rate is 8.20% compounding quarterly, what is the fair price of this investment?Work with 4 decimal places and round your answer to two decimal places. For example, if your answer is $345.667 round as 345.67 and if your answer is .05718 or 5.718% round as 5.72. A. $26,476.57 B. $38,511.37 C. $34,729.00 D. $34,385.15 E. $32,665.89An investment pays $2,100 per year for the first 4 years, $4,200 per year for the next 3 years, and $6,300 per year the following 7 years (all payments are at the end of each year). If the discount rate is 11.15% compounding quarterly, what is the fair price of this investment?Work with 4 decimal places and round your answer to two decimal places. For example, if your answer is $345.667 round as 345.67 and if your answer is .05718 or 5.718% round as 5.72. Group of answer choices $28,030.03 $26,178.99 $26,443.43 $31,467.68 $30,145.51
- What is the present value of 600 TL which will be invested at the end of each year during the next 12 years? Discount rate is 3%.6.345,96 TL4.632,785.972,4 TL9.623,478.515,2 TL.A five-year floater resets every six months to six-month LIBOR plus 100 basis points. The floater currently sells for $102.11 per $100 of face value. Six-month LIBOR is 6%. The amount of the assumed coupon that you use to calculate the discount margin for the floater is: Group of answer choices: $3 per $100 of face value $6 per $100 of face value $3.5 per $100 of face value $7 per $100 of face valueAn ARM is made for $220,000 for 30 years with the following terms: Initial interest rate = 7 percent Index = 1−year Treasuries Payments reset each year Margin = 2 percent Interest rate cap = None Payment cap = 5 percent increase in any year Discount points = 2 percent Fully amortizing; however, negative amortization allowed if payment cap reached Based on estimated forward rates, the index to which the ARM is tied is forecasted as follows: Beginning of year (BOY) 2 = 7 percent; (BOY) 3 = 8.5 percent; (BOY) 4 = 9.5 percent; (BOY) 5 = 11 percent. Required: a. Compute the payments and loan balances for the ARM for the five-year period. b. Compute the yield for the ARM for the five-year period.
- Suppose 6-month Treasury bills are trading at a YTM of 1%, 12-month T-bills are trading at a YTM of 3%. If 18-month Treasury notes with a coupon rate of 4% are trading at par ($100), then what is the 18-month spot rate? Assume semi-annual compounding. Round your answer to 4 decimal places. For example if your answer is 3.205%, then please write down 0.0321.Honesty Company is investing in 5-year treasury bills with a face value of P500,000 and annual interest rate of 5%.How much is the market value assuming a 360 days in a year?Honesty Company is investing in 91-day treasury bills with a total fair market value of P2,500,000 for a purchase price of P2,475,000.What is the annualized discount rate (round off your answer to two decimal places)?*Using Matlab* The current amount A of a principal P invested in a savings account paying an annual interest rate r is given by A = P(1+r/n)^(nt) where n is the number of times per year the interest is compounded. For continuous compounding, A = Pe^(rt). Suppose $10,000 is initially invested at 2.5 percent (r = 0.025). a. Plot A versus t for 0 ≤ t ≤ 20 years for four cases: continuous compounding, annual compounding (n = 1), quarterly compounding (n = 4), and monthly compounding (n = 12). Show all four cases on the same subplot and label each curve. On a second subplot, plot the difference between the amount obtained from continuous compounding and the other three cases. b. Redo part a, but plot A versus t on log-log and semilog plots. Which plot gives a straight line?
- Suppose that a three-year FRN pays a six-month Libor plus 4% semi-annually. Currently, the six-month Libor is 2%. The price of the floater is 90 per 100 of par value. What is the discount margin?An investment pays $1,950 per year for the first 3 years, $3,900 per year for the next 8 years, and $5,850 per year the following 11 years (all payments are at the end of each year). If the discount rate is 13.00% compounding quarterly, what is the fair price of this investment?Work with 4 decimal places and round your answer to two decimal places. For example, if your answer is $345.667 round as 345.67 and if your answer is .05718 or 5.718% round as 5.72. $18,962.98 $24,951.29 $20,460.05 $25,450.31 $24,701.77An investment will pay you $86, 000 in three years. Assume the appropriate discount rate is 7.5 percent compounded daily. What is the present value? Note: Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16. Use 365 days in a year.