finance data bank

Question # 00004222 Posted By: spqr Updated on: 11/28/2013 12:19 AM Due on: 12/28/2013
Subject Finance Topic Finance Tutorials:
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  1. The real risk-free rate of interest is 3 percent. Inflation is expected to be 2 percent this year and 4 percent during the next 2 years. Assume that the maturity risk premium is zero. What is the yield on 3-year Treasury securities?

  2. The real risk-free rate is 2.5%. Inflation is expected to average 2.8% a year for the next 4 years, after which time inflation is expected to average 3.75% a year. Assume that there is no maturity risk premium. An 8-year corporate bond has a yield of 8.3%. Assume that the liquidity premium on the corporate bond is 0.75%. What is the default risk premium on the corporate bond

3. The real risk free rate is 3%, and inflation is expected to be 3.5% for the next 2 years. A 2 year treasury security yields 6.8%. What is the maturity risk premium for the 2 year security?



4. The real risk free rate is 4%. Inflation is expected to be 3% this year, 4% next year, and then 2% for the following 2 years. Assume that the maturity risk premium is 0. What is the yield on 2 year Treasury securities? What about 4 year treasury securities5

5

You read in The Wall Street Journal that 30-day T-bills are currently yielding 5.5%. Your brother-in-law, a broker at Safe and Sound Securities, has given you the following estimates of current interest rate premiums:

Inflation premium= 3.25%

Liquidity premium= 0.6%

Maturity risk premium= 1.8%

Default risk premium= 2.15%

On the basis of these data, what is the real risk-free rate of return?


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  1. Tutorial # 00004016 Posted By: spqr Posted on: 11/28/2013 12:25 AM
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