What does the following yield curve predict? Treasury yield curve for July 31, 2000. Maturity Yield (%) 1 month 3 months 6.20 6 months 6.35 1 year 2 years 6.30 3 years 6.30 5 years 6.15 7 years 10 years 6.03 30 years 5.78
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A: R1 = 7.2% E(r2) = 8.3% L2 = 0.65% E(r3) = 8.4% L3 = 0.75% E(r4) = 8.7% L4 = 0.8%
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- Consider the following US treasury rate table expressed in percentage. Maturity Yield Last Last Yesterday R(0,t) Week Month 6 Month 2.65 2.35 1.85 1.55 1 Year 2.75 2.70 2.20 1.90 2 Year 3.60 2.90 2.40 2.10 3 Year 4.00 4.65 4.15 3.85 5 Year 4.80 4.70 2.20 3.90 10 Year 5.00 4.90 4.40 4.10 30 Year 5.50 5.30 4.80 4.50 The forward rate F(2,1) is the rate that applies to borrowing or lending starting in 2 years from today for an additional year. F(2,1) today is equal to: Answer in percentage with two digits decimal accuracy. Example 10.34Given the Treasury rates shown below, what is the expected 2 year Treasury rate one year from today? Term Yield 1 year 1% 2 year 6% 3 year 9% answer format: show your answer to one decimal places. If your answer is, for example, 3.252%, then input 3.3 without the percent sign.Given the Treasury rates shown below, what is the expected 2 year Treasury rate one year from today? Term Yield 1 year 2% 2 year 6% 3 year 9%
- In general, how do credit analysts determine the risk-free rate? Choose all that apply. The rate of return on S&P 500 | The average corporate yield The 10-year Treasury yield The yield on a 3-month U.S. Treasury BillYield curves yields on U.S Treasury securities were as follows: Term Rate 6 months 5.1% 1 years 5.5 2 years 5.6 3 years 5.7 4 years 5.8 5 years 6.0 10 years 6.1 20 years 6.5 30 years 6.3 Plot a yield curve based on these data What type of yield curve is shown What information does this graph tell you? Based on this yield curve, if you needed to borrow money for…A. 1 year interest rate? b. 2 year interest rate? c. 3 year interest rate? d. 4 year interest rate? e. Is the yield curve upward sloping, downward sloping, or flat? f. Is this the usual shape of the yield cirve?
- Assume that yields on U.S. Treasury securities were as follows:Term Rate6 months 4.69%1 year 5.492 years 5.663 years 5.714 years 5.895 years 6.0510 years 6.1220 years 6.6430 years 6.76 a. Plot a yield curve based on these data.b. What type of yield curve is shown?c. What information does this graph tell you?d. Based on this yield curve, if you needed to borrow money for longer than 1 year,would it make sense for you to borrow short term and renew the loan or borrow longterm? Explain.ok t Based on economists' forecasts and analysis, 1-year Treasury bill rates and liquidity premiums for the next four years are expected to be as follows: R1 = 0.65% E(201) = 1.80 % L2 = 0.04% E(301) = 1.98% L3 = 0.08% E(471) = 2.20% L4 = 0.10% Using the liquidity premium theory, determine the current (long-term) rates. (Do not round intermediate calculations. Round your answers to 2 decimal places.) Years 1 2 3 4 Current (Long- Term) Rates % % % %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…
- Maturity (Years) 1 5 10 20 30 Yield (%) 2.0 3.1 3.8 4.6 5.5 On the following graph, plot the yield curve implied by these interest rates. Place a blue point (circle symbol) at each maturity and interest rate in the table, and the yield curve will draw itself. 10 Yield Curve INTEREST RATE (Percent)6. The Fisher effect and the cost of unexpected inflation Suppose the nominal interest rate on savings accounts is 11% per year, and both actual and expected inflation are equal to 6%. Complete the first row of the table by filling in the expected real interest rate and the actual real interest rate before any change in the money supply. Time Period Nominal Interest Rate Expected Inflation Actual Inflation Expected Real Interest Rate Actual Real Interest Rate (Percent) (Percent) (Percent) (Percent) (Percent) Before increase in MS 11 6 6 Immediately after increase in MS 11 6 10 Now suppose the Fed unexpectedly increases the growth rate of the money supply, causing the inflation rate to rise unexpectedly from 6% to 10% per year. Complete the second row of the table by filling in the expected and actual real interest rates on savings accounts immediately after the increase in the money supply (MS). The unanticipated change in…1, 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 a, Calculate the average return for Treasury bills and the average annual inflation rate (consumer price index) for this period. b, Calculate the standard deviation of Treasury bill returns and inflation over this time period. c, Calculate the real return for each year. d, What is the average real return for Treasury bills?
