1. Under the pure expectation theory, when 1 year maturity yield 6.0%,
1. Under the pure expectation theory, when 1 year maturity yield 6.0%, 2 years maturity yield 6.2%, 3 years maturity yield 6.4%, 4 years maturity yield 6.5%, 5 years maturity yield 6.5%, what is the interest on two years security, three years from now, the forward rate: i 3,2)? (Hint: use the forumula (1+i m+n)^(m+n)=(1+i m)^m+(1+ i m,n)^n)
2. Ms. Sharon Corporation has 5-year bonds. Inflation premium (IP) on a 5year bond is 1.00%. The real risk-free rate is r* = 2.80%, the default risk premium for her bonds is DRP = 0.85% versus zero for T-bonds, the liquidity premium on her bonds is LP = 1.20%, and the maturity risk premium for all bonds is found with the formula MRP = (t – 1) x 0.1%, where t = number of years to maturity. What is the yield on her Corporation’s 5-year bonds?
Collepals.com Plagiarism Free Papers
Are you looking for custom essay writing service or even dissertation writing services? Just request for our write my paper service, and we'll match you with the best essay writer in your subject! With an exceptional team of professional academic experts in a wide range of subjects, we can guarantee you an unrivaled quality of custom-written papers.
Get ZERO PLAGIARISM, HUMAN WRITTEN ESSAYS
Why Hire Collepals.com writers to do your paper?
Quality- We are experienced and have access to ample research materials.
We write plagiarism Free Content
Confidential- We never share or sell your personal information to third parties.
Support-Chat with us today! We are always waiting to answer all your questions.
