Use the following information for Problems 36 through 39; assume "today" is Nov 15, 2019. Nov20 Nov21 Nov22 Nov24 Nov25 Maturity STRIPS Price Nov23 $790.94 $953.13 $901.56 $849.06 $742.19 $695.00 CHALLENGE QUESTION: Suppose due to liquidity concerns, investors demand a 65 basis point yield premium for investments held over maturities ranging from 5 to 10 years in horizon. According to the liquidity preference theory of the term structure, what does the market believe the 3-year maturity spot yield will be on Nov 15, 2022? O 7.44% O 7.90% 6.63% 5.53% O 6.16% CHALLENGE QUESTION: While not shown in the table, suppose you also had data for STRIPS market prices on May 15 of every year from 2020 through 2025. You want to value a 3-year maturity floating rate note today that pays a coupon of R + 100bp every six months, where is the annualized 6-month spot STRIPS yield on a reset date for the floater. To forecast the dollar figure for the cash flow payment that will occur exactly 2 years from now for this floater, what two pieces of information from the augmented STRIPS pricing table would you need to perform the calculation? Spot STRIPS prices for May 15, 2021 and Nov 15, 2021 Spot STRIPS prices for Nov 15, 2020 and May 15, 2021 Spot STRIPS prices for May 15, 2021 and May 15, 2022 Spot STRIPS prices for Nov 15, 2021 and May 15, 2022 Spot STRIPS prices for Nov 15, 2021 and Nov 15, 2022 Use the following information for Problems 36 through 39; assume "today" is Nov 15, 2019. Nov20 Nov21 Nov22 Nov24 Nov25 Maturity STRIPS Price Nov23 $790.94 $953.13 $901.56 $849.06 $742.19 $695.00 CHALLENGE QUESTION: Suppose due to liquidity concerns, investors demand a 65 basis point yield premium for investments held over maturities ranging from 5 to 10 years in horizon. According to the liquidity preference theory of the term structure, what does the market believe the 3-year maturity spot yield will be on Nov 15, 2022? O 7.44% O 7.90% 6.63% 5.53% O 6.16% CHALLENGE QUESTION: While not shown in the table, suppose you also had data for STRIPS market prices on May 15 of every year from 2020 through 2025. You want to value a 3-year maturity floating rate note today that pays a coupon of R + 100bp every six months, where is the annualized 6-month spot STRIPS yield on a reset date for the floater. To forecast the dollar figure for the cash flow payment that will occur exactly 2 years from now for this floater, what two pieces of information from the augmented STRIPS pricing table would you need to perform the calculation? Spot STRIPS prices for May 15, 2021 and Nov 15, 2021 Spot STRIPS prices for Nov 15, 2020 and May 15, 2021 Spot STRIPS prices for May 15, 2021 and May 15, 2022 Spot STRIPS prices for Nov 15, 2021 and May 15, 2022 Spot STRIPS prices for Nov 15, 2021 and Nov 15, 2022
