Question
Please help me to solve these questions. Kindly solve all parts its my request. All are linked. This is money and banking class. Question 1
Please help me to solve these questions. Kindly solve all parts its my request. All are linked. This is money and banking class.
Question 1
1 a. Suppose you own a corporate coupon bond that you plan on selling it next period for $1000. This bond has an annual coupon payment of $100 and a rate of capital gain of 5%. What is the holding period return for this coupon bond?
1 b. What is the price of a consol whose price is $5,000 and has an interest rate of 1%?
1 c. What is the price next year for a coupon bond with a face value of $600 and a coupon rate of 5% that will mature over 5-years and a yield to maturity of
2.5%?
Question 2
2 a Complete the following table
Year | One-year Rate | Liquidity Premium | Multiyear Rate predicted by Expectation Theory | Multiyear Rate predicted by Liquidity Premium theory |
1 | 1% | 0% | - | - |
2 | 2% | 1% | - | - |
3 | 3% | .5% | - | - |
4 | 4% | .25% | - | - |
2 b. Construct a graph highlighting the liquidity premium
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