A Forward Rate Assume that, as of today, the annualized interest rate on a three year security is 10 percent and the annualized interest rate on a two year security is 7 percent Assume that the liquidity premium on a two year security is 0 3 percent Use this information to estimate the one year forward rate two years from now B You need to choose between investing in a one year municipal bond with a 7 percent yield and a one year corporate bond with an 11 percent yield If your marginal GRA income tax rate is 30 percent and no other differences exist between these two securities, which would you invest in C A company is planning to sell its 90 day commercial paper to investors by offering an 8 4 percent yield If the face value of a three month Treasury bill is GHS1000 which is also selling at GHS950, the credit risk premium is estimated to be 0 6 percent, and there is a 0 4 percent tax adjustment, then what is the liquidity premium on the commercial paper D Consider the prevailing conditions for inflation (including oil prices), the economy, the budget deficit, and the Bank of Ghanas monetary policy that could affect interest rates Based on these conditions, do you think interest rates will likely increase or decrease during the last quarter of the year Offer some logic to support your answer Which factors do you think will have the greatest impact on interest rates in Ghana A Forward Rate Assume that, as of today, the annualized interest rate on a three year security is 10 percent and the annualized interest rate on a two year security is 7 percent Assume that the liquidity premium on a two year security is 0 3 percent Use this information to estimate the one year forward rate two years from now B You need to choose between investing in a one year municipal bond with a 7 percent yield and a one year corporate bond with an 11 percent yield If your marginal GRA income tax rate is 30 percent and no other differences exist between these two securities, which would you invest in C A company is planning to sell its 90 day commercial paper to investors by offering an 8 4 percent yield If the face value of a three month Treasury bill is GHS1000 which is also selling at GHS950, the credit risk premium is estimated to be 0 6 percent, and there is a 0 4 percent tax adjustment, then what is the liquidity premium on the commercial paper D Consider the prevailing conditions for inflation (including oil prices), the economy, the budget deficit, and the Bank of Ghana's monetary policy that could affect interest rates Based on these conditions, do you think interest rates will likely increase or decrease during the last quarter of the year Offer some logic to support your answer Which factors do you think will have the greatest impact on interest rates in Ghana

The Answer is in the image, click to view ...

Answered step by step

Verified Expert Solution

Link Copied!

Question

1 Approved Answer

Posted on Aug 02, 2024

A. Forward Rate Assume that, as of today, the annualized interest rate on a three-year security is 10 percent and the annualized interest rate on

B. You need to choose between investing in a one-year municipal bond with a 7 percent yield and a one-year corporate bond with an 11 percent yield. If your marginal GRA income tax rate is 30 percent and no other differences exist between these two securities, which would you invest in?

C. A company is planning to sell its 90-day commercial paper to investors by offering an 8.4 percent yield. If the face value of a three-month Treasury bill is GHS1000 which is also selling at GHS950, the credit risk premium is estimated to be 0.6 percent, and there is a 0.4 percent tax adjustment, then what is the liquidity premium on the commercial paper?

D. Consider the prevailing conditions for inflation (including oil prices), the economy, the budget deficit, and the Bank of Ghanas monetary policy that could affect interest rates. Based on these conditions, do you think interest rates will likely increase or decrease during the last quarter of the year? Offer some logic to support your answer. Which factors do you think will have the greatest impact on interest rates in Ghana?

image text in transcribed

A. Forward Rate Assume that, as of today, the annualized interest rate on a three-year security is 10 percent and the annualized interest rate on a two-year security is 7 percent. Assume that the liquidity premium on a two-year security is 0.3 percent. Use this information to estimate the one-year forward rate two years from now. B. You need to choose between investing in a one-year municipal bond with a 7 percent yield and a one-year corporate bond with an 11 percent yield. If your marginal GRA income tax rate is 30 percent and no other differences exist between these two securities, which would you invest in? C. A company is planning to sell its 90 -day commercial paper to investors by offering an 8.4 percent yield. If the face value of a three-month Treasury bill is GHS1000 which is also selling at GHS950, the credit risk premium is estimated to be 0.6 percent, and there is a 0.4 percent tax adjustment, then what is the liquidity premium on the commercial paper? D. Consider the prevailing conditions for inflation (including oil prices), the economy, the budget deficit, and the Bank of Ghana's monetary policy that could affect interest rates. Based on these conditions, do you think interest rates will likely increase or decrease during the last quarter of the year? Offer some logic to support your answer. Which factors do you think will have the greatest impact on interest rates in Ghana