PRIN.OF CORPORATE FINANCE
13th Edition
ISBN: 9781260013900
Author: BREALEY
Publisher: RENT MCG
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Chapter 3, Problem 27PS
Term-structure theories The one-year spot interest rate is r1 = 5% and the two-year rate is r2 = 6%. If the expectations theory is correct, what is the expected one-year interest rate in one year’s time?
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consider the following spot interest rates for maturities of one, two, three, and four years. r1=4.1%, r2=4.5% r3=5.2% r=6.0% what are teh following forward rates, where fk.1 refers toa forward rate beginning in the k years and extending for the 1 year?
Consider the following spot interest rates for maturities of one, two, three, and four years.
r1 = 6.10%
r2 = 6.00%
r3 = 5.80%
r4 = 5.50%
What are the following forward rates?
Hint: f1, k refers to a forward rate for the period beginning in one year and extending for k years. fk,1 refers to a forward rate beginning in k years and extending for 1 year.
f1,1 :
f1,2 :
f1,3 :
f2,1:
f3,1 :
Suppose that the current one-year rate (one-year spot rate) and expected one-year T-bill rates over the following three years (i.e., years 2, 3, and 4, respectively) are as follows: 1R1 = 0.3%, E(2r 1) = 1.3%, E(3r1) = 8.9%, E(4r1) = 9.25% Using the unbiased expectations theory, calculate the current (long-term) rates for one-, two-, three-, and four-year-maturity Treasury securities.
Chapter 3 Solutions
PRIN.OF CORPORATE FINANCE
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Ch. 3 - Bond returns If a bonds yield to maturity does not...Ch. 3 - Bond returns a. An 8%, five-year bond yields 6%....Ch. 3 - Prob. 10PSCh. 3 - Duration True or false? Explain. a....Ch. 3 - Duration Here are the prices of three bonds with...Ch. 3 - Duration Calculate the durations and volatilities...Ch. 3 - Prob. 14PSCh. 3 - Duration Find the spreadsheet for Table 3.4 in...Ch. 3 - Prob. 16PSCh. 3 - Spot interest rates and yields Which comes first...Ch. 3 - Prob. 18PSCh. 3 - Spot interest rates and yields Look again at Table...Ch. 3 - Prob. 20PSCh. 3 - Spot interest rates and yields Assume annual...Ch. 3 - Spot interest rates and yields A 6% six-year bond...Ch. 3 - Spot interest rates and yields Is the yield on...Ch. 3 - Prob. 24PSCh. 3 - Measuring term structure The following table shows...Ch. 3 - Term-structure theories The one-year spot interest...Ch. 3 - Term-structure theories Look again at the spot...Ch. 3 - Real interest rates The two-year interest rate is...Ch. 3 - Prob. 30PSCh. 3 - Bond ratings A bonds credit rating provides a...Ch. 3 - Prob. 32PSCh. 3 - Price and spot interest rates Find the arbitrage...Ch. 3 - Prob. 34PSCh. 3 - Prices and spot interest rates What spot interest...Ch. 3 - Prices and spot interest rates Look one more time...
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