1-) Suppose we observe the following rates: 1R1 = 9%, 1R2 =
11%. If the unbiased expectations theory of the term structure of interest
rates holds, what is the 1-year interest rate expected one year from now,
E(2r1)? (Do not round intermediate calculations and round your answer to the
nearest whole percent.)
Interest rate
%
2-) You note the following yield curve in The Wall Street
Journal. According to the unbiased expectations theory, what is the 1-year
forward rate for the period beginning one year from today, 2f1? (Round your
answer to 2 decimal places.)
Maturity Yield
One day 2.20 %
One year 5.70
Two years 6.70
Three years 9.20
________________________________________
Forward rate
%
3-)The Wall Street Journal reports that the rate on 3-year
Treasury securities is 5.45 percent and the rate on 4-year Treasury securities
is 5.80 percent. The 1-year risk-free rate expected in three years is, E(4r1),
is 6.40 percent. According to the liquidity premium hypotheses, what is the
liquidity premium on the 4-year Treasury security, L4? (Do not round
intermediate calculations and round your final answer to 2 decimal places.)
liquidity premium
%
4-) A 5.20 percent coupon bond with 17 years left to
maturity can be called in five years. The call premium is one year of coupon
payments. It is offered for sale at $1,080.70. What is the yield to call of the
bond? (Assume interest payments are semiannual.) (Round your answer to 2
decimal places.)
Yield to call
%
5-) A 7.40 percent coupon bond with 12 years left to
maturity is priced to offer a 8.1 percent yield to maturity. You believe that
in one year, the yield to maturity will be 7.7 percent. What is the change in
price the bond will experience in dollars? (Do not round intermediate
calculations and round your final answer to 2 decimal places.)
Change in bond price $
6-) A 5.55 percent coupon bond with ten years left to
maturity is priced to offer a 7.0 percent yield to maturity. You believe that
in one year, the yield to maturity will be 6.0 percent. What is the change in
price the bond will experience in dollars? (Do not round intermediate
calculations and round your final answer to 2 decimal places.)
Change in bond price $
7-) A 6.65 percent coupon bond with 19 years left to
maturity is offered for sale at $1,135.25. What yield to maturity is the bond
offering? (Assume interest payments are semiannual.) (Round your answer to 2
decimal places.)
Yield to maturity
%
😎 Annual dividends of AT&T Corp (T) grew from $0.95 in
2000 to $1.16 in 2012.
What was the annual growth rate? (Round your answer to 2
decimal places.)
Annual growth rate
%
9-) A firm does not pay a dividend. It is expected to pay
its first dividend of $0.40 per share in three years. This dividend will grow
at 10 percent indefinitely. Use an 11 percent discount rate.
Compute the value of this stock. (Round your answer to 2
decimal places.)
Stock value $
10-)Paychex Inc. (PAYX) recently paid an $0.70 dividend. The
dividend is expected to grow at an 11 percent rate. The current stock price is
$41.31.
What is the return shareholders are expecting? (Do not round
intermediate calculations and round your final answer to 2 decimal places.)
Shareholders return
%
