exercises : 5.15 , 5.17 and 5.19

six year la five-year bond) and (b) 2024 (a six-ye Assume the bonds have no risks. rate greater than 15 percent. The yield is the same on one-year bonds and two-year bonds: the yield on three-year bonds is 0.5 percent greater than on one- year and two year bonds. The real risk-free rate is 2 percent for all bonds. If the bonds are risk-free, what rate of inflation is expected in Year 3 and beyond? 5-14 Today is January 2, 2019, and investors expect the annual risk-free interest rates in 2019 through 2021 to be: at the yield on 3 percent, the ye is 2.9 percent, and is 43 perc sociated with naturity risk premium Year One-Year Rate) 2019 2.296 2020 2021 What is the yield to maturity for Treasury bonds that mature at the end of (a) 2020 (a two-year bond) and (b) 2021 (a three-year bond)? Assume the bonds have no risks. 5-15 Suppose today is January 2, 2019, and investors expect the annual inflation rates in 2019 through 2021 to be: 5-17 The Wall Street Journal reports that the nine-month Treasury bond is 2.3 percer on a three-year Treasury bond is 2.9 per the yield on a 10-year Treasury bond is 43 Although no liquidity premium is associated Treasury securities, there is a maturity risk (MRP) for Treasuries with maturities equal to year or greater. What is the MRP? 5-18 Currently, a six-month Treasury bill is yielding 3.2 percent. Company F's three-year bond hasa yield equal to 5.0 percent, and its seven-year bord has a yield equal to 5.8 percent. Although none of the bonds has a liquidity premium, any bond with a maturity equal to one year or longer has a maturity premium (MRP). Except for their terms to maturity, the characteristics of the bonds are the same. Compute the (a) annual MRP and (b) default risk premium (DAP associated with the bonds. Year One-Year Inflation Rate 2.19 2019 2020 2021 09 To yield a real risk-free rate, r*, equal to 2 percent, what would the average nominal rate be on a (a) one-year bond, (b) two-year bond, and (c) three-year bond? Assume the bonds are risk-free. 5-16 Suppose today is January 2, 2019, and investors expect the annual risk-free interest rates in 2023 and 2024 to be: 5-19 Suppose economists expect that the nominal risk free rate of return, which is also the rate ona one-year Treasury note, will be 3.2 percent long into the future. You are evaluating two corporate bonds that are identical except for their terms to maturity The bonds have the same default risk, and neither bond has a liquidity premium. Bond T matures in five years and has a yield equal to 5.3 percent whereas Bond Q matures in eight years and has a yield equal to 5.9 percent. Compute (a) the annual maturity risk premium (MRP) and (b) the bonds default risk premium (DRP). 5-20 Economists expect that the nominal risk-free rate of return, r...on one-year Treasury bonds will be 2.4 percent long into the future. General Machinery's (GM) one-year bond has a yield eq to 4.8 percent. The yield on the GM bond inclue a liquidity premium equal to 0.3 percent. Supp the maturity risk premium (MRP) for all bonds Year One-Year Rater) 2023 2024 Currently a four-year Treasury bond that matures December 31, 2022 has an interest rate equal to 25 percent. What is the yield to maturity for Treasury bonds that mature at the end of 2022 maturities greater than one year is 0.15 perc year. Based on this information, what should yield on GM's five-year bonds? e year is 0.15 percent n what should be six year la five-year bond) and (b) 2024 (a six-ye Assume the bonds have no risks. rate greater than 15 percent. The yield is the same on one-year bonds and two-year bonds: the yield on three-year bonds is 0.5 percent greater than on one- year and two year bonds. The real risk-free rate is 2 percent for all bonds. If the bonds are risk-free, what rate of inflation is expected in Year 3 and beyond? 5-14 Today is January 2, 2019, and investors expect the annual risk-free interest rates in 2019 through 2021 to be: at the yield on 3 percent, the ye is 2.9 percent, and is 43 perc sociated with naturity risk premium Year One-Year Rate) 2019 2.296 2020 2021 What is the yield to maturity for Treasury bonds that mature at the end of (a) 2020 (a two-year bond) and (b) 2021 (a three-year bond)? Assume the bonds have no risks. 5-15 Suppose today is January 2, 2019, and investors expect the annual inflation rates in 2019 through 2021 to be: 5-17 The Wall Street Journal reports that the nine-month Treasury bond is 2.3 percer on a three-year Treasury bond is 2.9 per the yield on a 10-year Treasury bond is 43 Although no liquidity premium is associated Treasury securities, there is a maturity risk (MRP) for Treasuries with maturities equal to year or greater. What is the MRP? 5-18 Currently, a six-month Treasury bill is yielding 3.2 percent. Company F's three-year bond hasa yield equal to 5.0 percent, and its seven-year bord has a yield equal to 5.8 percent. Although none of the bonds has a liquidity premium, any bond with a maturity equal to one year or longer has a maturity premium (MRP). Except for their terms to maturity, the characteristics of the bonds are the same. Compute the (a) annual MRP and (b) default risk premium (DAP associated with the bonds. Year One-Year Inflation Rate 2.19 2019 2020 2021 09 To yield a real risk-free rate, r*, equal to 2 percent, what would the average nominal rate be on a (a) one-year bond, (b) two-year bond, and (c) three-year bond? Assume the bonds are risk-free. 5-16 Suppose today is January 2, 2019, and investors expect the annual risk-free interest rates in 2023 and 2024 to be: 5-19 Suppose economists expect that the nominal risk free rate of return, which is also the rate ona one-year Treasury note, will be 3.2 percent long into the future. You are evaluating two corporate bonds that are identical except for their terms to maturity The bonds have the same default risk, and neither bond has a liquidity premium. Bond T matures in five years and has a yield equal to 5.3 percent whereas Bond Q matures in eight years and has a yield equal to 5.9 percent. Compute (a) the annual maturity risk premium (MRP) and (b) the bonds default risk premium (DRP). 5-20 Economists expect that the nominal risk-free rate of return, r...on one-year Treasury bonds will be 2.4 percent long into the future. General Machinery's (GM) one-year bond has a yield eq to 4.8 percent. The yield on the GM bond inclue a liquidity premium equal to 0.3 percent. Supp the maturity risk premium (MRP) for all bonds Year One-Year Rater) 2023 2024 Currently a four-year Treasury bond that matures December 31, 2022 has an interest rate equal to 25 percent. What is the yield to maturity for Treasury bonds that mature at the end of 2022 maturities greater than one year is 0.15 perc year. Based on this information, what should yield on GM's five-year bonds? e year is 0.15 percent n what should be