What security provides a good estimate of the long-term nominalrisk-free rate?

Q: Assuming that the pure expectations theory is correct, how are expected short-termrates used to…

A: Pure expectations theory believes that expected future rates can be represented by the forward…

Q: What is a compounding interest rate?

A: Interest rate is the rate charged by the lender for the amount of money lend by him. Lender can be…

Q: What would cause the annual interest rate to be different from the annual effective rate or yield?

A: Effective Interest Rate: The fixed rate applied to carrying value of the bonds to calculate the…

Q: a. what is the difference between the discount rate used for net present value and the internal rate…

A: Discount rate used for net present value is rate which investor want to earn from a project . It is…

Q: Nhat is the exact rate of return?

A: The net gain or net loss of an investment over a predetermined time period is referred to as a rate…

Q: Explain risk-free interest rate (the nominal short-term rate)

A: The Capital Asset Pricing Model describes the relationship between the projected return for assets…

Q: Explain The Need for an External Interest Rate?

A: There is a strong need for the external interest rate because it helps in making financial…

Q: What is maturity matching approach (for short-term financing)?

A: This approach states that the maturity of company’s assets and liabilities should be coordinated to…

Q: Identify the MARR (or external interest rate)?

A: A minimum acceptable rate of return (MARR) is the all-out advantage that a speculator wants to pick…

Q: Explain real risk-free interest rate

A: The interest rate in real terms is the actual interest rate after adjusting the inflation effect.…

Q: Define expected rate of return on a portfolio

A: Expected Return: The expected return is the minimum required rate of return which an investor…

Q: Explain Interest Rates and Inflation Expectation?

A: An interest rate is the measure of cash a bank or creditor charges for right of entry to cash. The…

Q: What is Long-Term Equity AnticiPation Security (LEAPS)?

A: Long-term equity anticipation securities (LEAPS) It's a contract for trading on open market options…

Q: Which are the two computational schemes for calculating this earned interest yield?

A: The two computational schemes for calculating the earned interest yield are compound interest scheme…

Q: According to the pure expectations theory, what would happen if long-term rateswere not an average…

A: Expectation theory: The theory states that the future short term rate will be based on current long…

Q: What security provides a good estimate of the short-term nominalrisk-free rate?

A: T-bills are the treasury bills issued by the government. These bills are risk-free and the rate of…

Q: What effects do relative inflation rates have on relative interest rates?

A: Relative Inflation Rates can be defined as the rates of inflation and exchange rates established…

Q: Write an equation for the nominal interest rate on any security.

A: Step 1: Nominal interest rate is a rate before considering the inflation into an account, in…

Q: How can we determine the Net Present-Worth Amounts at Varying Interest Rates?

A: Answer: Net present worth is an estimation method applied to various time intervals when cash flows…

Q: When is a project in Need for an External Interest Rate?

A: When net cash flow that is generated by the project during the project’s life is reinvested, then…

Q: Explain risk-free nominal rate of interest rate

A: This is the raw rate of return which does not take inflation into consideration. This is the rate…

Q: ubmit The longer the time to maturity, the lower the security's price sensitivity to an interest…

A: Higher the maturity, higher will be the duration of the bond, if all other factors are constant. A…

Q: Find the future value for each of the following scenarios, where m is the periodic deposit and r is…

A: It is abbreviated as “Future Value, is the expected amount during the closure at a point in time in…

Q: List two examples of different benchmarks that are used to determine the coupon rate of a…

A: Different benchmarks:- Benchmarking is a competitive advantage that enables businesses to adapt,…

Q: The real rate of return is related to O The risk-free rate The risk-free and the inflation rate The…

A: Real rate of returnAn annual profit percentage that is earned on the investment, being adjusted for…

Q: Distinguish between the initial rate of interest and the expected yield on an ARM. What is the…

A: Introduction: The adjustable rate mortgage is one of the method used to calculate the interest rate…

Q: As long as the inflation rate is positive, the nominal rate of return on a security will be the real…

A: Let the inflation rate = i Nominal rate = n Real rate = r

Q: A) What was your expected yield to maturity? B) What was your actual rate of return?

A: The yield to maturity (YTM) is the annual percentage rate of return on a bond if the investor…

Q: Explain risk-free interest rate (the nominal long-term rate)

A: The rate at which an additional amount that a borrower pays to the lender over the borrowing amount…

Q: which of the following is necessary to solve a discount problem?   a.future amount   b.interest…

A: In a discounting problem, the present value of future cash flow is calculated. In order to…

Q: Discuss the relative volatility of short- and long-term interest rates.

A: Short-term interest rates refer to the rates that are assigned for a period of 12 months or less.…

Q: What is the formula for the following: Payback period. Net Present Value Internal Rate of return…

A: Accounting:   Accounting is the art of recording, classifying and summarizing in a significant…

Q: what is the nominal risk-free rate

A: T-bills also known as treasury bills. T- bills are government bonds or debt securities which are…

Q: Most evidence suggests that a positive maturity risk premium exists. How would thisaffect your…

A: The question is based on the concept of calculation of interest rate in a bond with association to…

Q: Is a cap rate the same as an IRR? Which is generally greater? Why?

A: The capitalization rate or cap rate cant be considered as similar to the IRR or the internal rate of…

Q: In an inflationary period, what is the difference between (a) inflated dollars and “then-current”…

A: Inflation is the rate at which goods and services cost rates increment. On the off chance that…

Q: What is the term for the type of interest rates that constitute the yield curve? What do these…

A: Type of interest rates - The nominal interest rate, the effective rate, and the real interest rate…

Q: By which symbol is the break-even interest rate denoted?

A: Break-even interest rate is the maximum rate of interest before negative leverage.

Q: Which of the following is included inthe risk-free rate? O A. the default premium O B. the expected…

A: Risk free rate is the return on the asset that has zero risk associated to it. It is a theoretical…

Treasury Market

On-the-run securities are the most recently issued securities in the market depth and are therefore traded at some premium. The off-the-run securities are the ones issued just before the most recent ones. The on-the-run securities have a lower yield to the investor than the off-the-run securities.