Homework Assignment for chapter 2:

This assignment contains 3 questions. Please follow the instructions to prepare your assignment in order to earn the maximum points. Also, please do not submit your assignment at the end of the semester. It will affect your final grade. If you have any questions or concerns, please do not hesitate to contact me anytime.

Question 1: Please see page 53, example 2-2 as reference:

Your client wants to invest to current investments, your client wants ask you to find out the next 5 years expected rate of return.

₁R₁ = 1.50% E(₂r₁) = 2.5% E(₃r₁) = 3.0% E(₄r₁) = 3.5% E(₅r₁) = 4.5%

Instructions:

1] Please using the Unbiased Expectation Theory of the Tem Structure of Interest Rates. 2] Please provide a clear calculation and brief explanation to support your calculation.

---------------------------------------------------------------------------------------------------------------------------------------- Question 2 : Please see page 55, example 2-3 as reference:

Your cline also wants to determine the Liquidity of his investment by using Liquidity Premium Theory. Base on the question 1, it shows the information as follows:

₁R₁ = 1.50% E(₂r₁) = 2.5% E(₃r₁) = 3.0% E(₄r₁) = 3.5% E(₅r₁) = 4.5%

In addition, you charge a liquidity premium on longer-term securities such that:

L₂ = 0.15% L₃ = 0.25% L₄ = 0.35% L₅ = 0.40%

Instructions:

1] Please using the Liquidity Premium Theory of the Term Structure of Interest Rates. 2] Please provide a clear calculation and brief explanation to support your calculation. ------------------------------------------------------------------------------------------------------------------------------------------

Question 3 : Please see page 57, example 2-4 as reference:

Your other client asks you to find implied forward rate on his investments.

₁R₁ = 0.30% E(₂r₁) = 0.6% E(₃r₁) = 0.85% E(₄r₁) = 0.95% E(₅r₁) = 1.5%

Instructions:

[1] Please calculate of Implied Forward Rates on One-Year Securities Using the Unbiased Expectations Hypothesis

[2] Please provide a clear calculation and brief explanation to support your calculation.

Homework Assignment for chapter 2: This assignment contains 3 questions. Please follow the instructions to prepare your assignment in order to earn the maximum points. Also, please do not submit your assignment at the end of the semester. It will affect your final grade. If you have any questions or concerns, please do not hesitate to contact me anytime. Question 1: Please see page 53, example 2-2 as reference: Your client wants to invest to current investments, your client wants ask you to find out the next 5 years expected rate of return. R = 1.50% E(2r1) = 2.5% E(3r1) = 3.0% E(4r1) = 3.5% E(5r1) = 4.5% 1 1 Instructions: 1] Please using the Unbiased Expectation Theory of the Tem Structure of Interest Rates. 2] Please provide a clear calculation and brief explanation to support your calculation. ---------------------------------------------------------------------------------------------------------------------------------------Question 2 : Please see page 55, example 2-3 as reference: Your cline also wants to determine the Liquidity of his investment by using Liquidity Premium Theory. Base on the question 1, it shows the information as follows: R = 1.50% E(2r1) = 2.5% E(3r1) = 3.0% E(4r1) = 3.5% E(5r1) = 4.5% 1 1 In addition, you charge a liquidity premium on longer-term securities such that: L2 L3 L4 L5 = 0.15% = 0.25% = 0.35% = 0.40% Instructions: 1] Please using the Liquidity Premium Theory of the Term Structure of Interest Rates. 2] Please provide a clear calculation and brief explanation to support your calculation. ------------------------------------------------------------------------------------------------------------------------------------------ Question 3 : Please see page 57, example 2-4 as reference: Your other client asks you to find implied forward rate on his investments. R = 0.30% E(2r1) = 0.6% E(3r1) = 0.85% E(4r1) = 0.95% E(5r1) = 1.5% 1 1 Instructions: [1] Please calculate of Implied Forward Rates on One-Year Securities Using the Unbiased Expectations Hypothesis [2] Please provide a clear calculation and brief explanation to support your calculation