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5) What is the
options:
38.34
35.78
40.05
43.47
Step by step
Solved in 3 steps
- A6 Calculate the interest rate sensitivity (change in price with respect to the interest rate) of a 1 year and a 5 year bond paying coupons of 4% when the current interest rate is 2%.Q5 If the 60-day interest rates (simple, p.a.) are 3% at home (usd) and 4% abroad (eur) and the spot rate moves from 1.000 to 1.001.(a) What is the actual change in the forward rate? (b) What is the predicted change in the swap rate computed from the return differential?(c) What is the actual change in the swap rate?1. It is 25 July 2022; you observe two treasury bills Price 99.7985 25 March 2023 98.3855 Maturity 25 September 2022 (a) What are appropriate discount factors for 2 months and 8 months? (b) What are the spot rates, with semi-annual compounding, for 2 months and 8 months? (c) What would be a fair price for a bond, maturing on 25 March 2023, paying a 5% per annum coupon rate, with a semi-annual coupon? (d) Now suppose that you observed a bond, maturing on 25 Septem- ber 2023, paying a 1% per annum coupon rate (with semi-annual coupons), trading at a yield to maturity of 2.75%. Use the DMO formula to calculate the bond's price. (e) What is an appropriate discount factor for 25 September 2023? (f) Calculate forward rates (with semi-annual compounding) from 25 September 2022 to 25 March 2023, and from 25 March 2023 to 25 September 2023.
- 5. If the 60-day interest rates (simple, p.a.) are 3% at home (usd) and 4% abroad (eur) and thespot rate moves from 1.000 to 1.001:(a) What is the return differential, and what is the corresponding prediction of the change in the forward rate? (b) What is the actual change in the forward rate?(c) What is the predicted change in the swap rate computed from the return differential?(d) What is the actual change in the swap rate?Question 1. The continuous one-year, two-year, and three-year zero rates are 1.25%, 1.5%, 1.75% respectively. (a) Compute the two-year forward one-year libor rate. This is the forward libor rate for the period starting 2 years from now and ending 1 year after that. (Remember libor is a simple interest rate, it is not a compounded rate.) (b) Suppose the two-year forward two-year libor rate is 3%. What is the continuous four-year zero rate?If the one-year and two-year interest rates are 6.5% and 7% respectively, what should be the forward rate for year 2 (according to the expectations theory)? 7% 7.5% 7.75% 7.25% 6.75%. 6.5%
- D4) The one-year spot rate is 2.0%, the two-year spot rate is 2.8% and the three-year spot rate is 3.6%. What is the price (per $100 of face value) of a 3-year bond paying a 8.1% annual coupon? a. $112.583 b. $112.824 c. $116.552 d. $120.164ook int ences Problem 2-11 (LG 2-7) Suppose we observe the three-year Treasury security rate (13) to be 4.9 percent, the expected one-year rate next year-E(21)-to be 5.4 percent, and the expected one-year rate the following year-E(31)-to be 6.4 percent. If the unbiased expectations theory of the term structure of interest rates holds, what is the one-year Treasury security rate? (Do not round intermediate calculations. Round your percentage answer to 2 decimal places. (e.g., 32.16)) _________% One-year Treasury security rateIns 8. Suppose that today's interest rate on 1-year bonds is 4% (i10 year bonds next year, in two years, and in three years are expected to be 5%, 6%, and 7%, respectively. 0.04). Interest rates on 1- ha a. According to the Expectations Theory of Term Structure, what are the equilibrium interest rates today for otherwise comparable 2-year, 3-year, and 4-year bonds? b. Draw the yield curve for that case. or
- How much would $A payable in three years be worth today if the applicable annual effective interest rates convertible quarterly over the period are i0, i1 and i2 for period one, two, and three respectively?What compound interest rate j,, is equivalent over 4-year period to a simple interest rate of 2.24 % the first year followed by a simple discount rate of 7.41 % for the next 3 years ? Answer: 0.0573What nominal interest rate compounded quarterly is equivalent to j∞=j∞= 7%?