An analyst evaluating securities has obtained the following information. The real rate of interest is 2.2%...

An analyst evaluating securities has obtained the following information. The real rate of interest is 2.2% and is expected to remain constant for the next 5 years. Inflation is expected to be 2.1% next year, 3.1% the following year, 4.1% the third year, and 5.1% every year thereafter. The maturity risk premium is estimated to be 0.1 × (t – 1)%, where t = number of years to maturity. The liquidity premium on relevant 5-year securities is 0.5% and the default risk premium on relevant 5-year securities is 1%. a. What is the yield on a 1-year T-bill? Round your intermediate calculations and final answer to two decimal places. % b. What is the yield on a 5-year T-bond? Round your intermediate calculations and final answer to two decimal places. % c. What is the yield on a 5-year corporate bond? Round your intermediate calculations and final answer to two decimal places. %

Expert Solution

jeff jeffy answered 2 years ago

An analyst evaluating securities has obtained the following information. The real rate of interest is 2.9%...

An analyst evaluating securities has obtained the following information. The real rate of interest is 2.9% and is expected to remain constant for the next 5 years. Inflation is expected to be 2.6% next year, 3.6% the following year, 4.6% the third year, and 5.6% every year thereafter. The maturity risk premium is estimated to be 0.1 × (t – 1)%, where t = number of years to maturity. The liquidity premium on relevant 5-year securities is 0.5% and the...

An analyst evaluating securities has obtained the following information. The real rate of interest is 2.3%...

An analyst evaluating securities has obtained the following information. The real rate of interest is 2.3% and is expected to remain constant for the next 5 years. Inflation is expected to be 2.1% next year, 3.1% the following year, 4.1% the third year, and 5.1% every year thereafter. The maturity risk premium is estimated to be 0.1 × (t – 1)%, where t = number of years to maturity. The liquidity premium on relevant 5-year securities is 0.5% and the...

An analyst evaluating securities has obtained the following information.

An analyst evaluating securities has obtained the following information. The real rate of interest is 2.9% and is expected to remain constant for the next 5 years. Inflation is expected to be 2.1% next year, 3.1% the following year, 4.1% the third year, and 5.1% every year thereafter. The maturity risk premium is estimated to be 0.1 × (t – 1)%, where t = number of years to maturity. The liquidity premium on relevant 5-year securities is 0.5% and the...

Which one of the following types of securities has tended to produce the lowest real rate...

Which one of the following types of securities has tended to produce the lowest real rate of return for the period 1969 through 2010? A. Real Estate B. Long-term government bonds C. Long-term corporate bonds D. Stocks E. U.S. Treasury bills

Suppose the real rate is 3.45 percent and the inflation rate is 2.2 percent.

1) Suppose the real rate is 3.45 percent and the inflation rate is 2.2 percent. What rate would you expect to earn on a Treasury bill? A) 1.25 percent B) 7.75 percent C) 5.73 percent D) 6.56 percent E) 3.30 percent 2) The common stock of Dayton Repair sells for $47.92 a share. The stock is expected to pay $2.28 per share next year when the annual dividend is distributed. The company increases its dividends by 1.65 percent annually. What is the market rate of return...

Testbank, Question 15 An analyst has obtained the following information about Maudite Brewers Co.: Book value...

Testbank, Question 15 An analyst has obtained the following information about Maudite Brewers Co.: Book value of assets $25,000; book value of common equity $10,000; book value of preferred shares $5,000. The company has 4,000 common shares outstanding which are currently trading at $5 per share. The company has 3,000 preferred shares outstanding which are currently trading at $2 per share. The yield on the debt equals the coupon rate. The weights used to determine the weighted average cost of...

As a demand analyst working for a supermarket chain, you have obtained the following information from...

As a demand analyst working for a supermarket chain, you have obtained the following information from your stores' price scanner system: as the price of avocados decreases from 40¢ to 30¢ , the quantity demanded of avocados in your areas changes from 18,000 to 22,000 avocados per week. a. find the own price elasticity for avocados. (You do not need to show your work, just enter in the final answer) b. Is demand for avocados relatively elastic or inelastic? Would...

Nhi Tran - an analyst of KIS Viestnam Securities Corporatio gathered the following information from a...

Nhi Tran - an analyst of KIS Viestnam Securities Corporatio gathered the following information from a company's 2019 financial statement (in $ millions): 2017 2018 2019 Net income 3,879 3,586 3,416 Cash flow+A1 from operations 5,025 5,012 4,414 Net capital expenditures 3,933 3,423 2,938 Net borrowing (400) (108) 238 Dividends paid 580 903 1,081 Stock repurhase - 422 1,060 Using the above information, which...

Based on the following information, calculate: Real risk-free rate of interest = 2.75% Inflation Premium =...

Based on the following information, calculate: Real risk-free rate of interest = 2.75% Inflation Premium = 1.75% Default Risk Premium = 1.25% Liquidity Premium = 0.5% Maturity Risk Premium = 0.75% If this were a long-term Treasury security, or T-bond, what would be the nominal risk-risk free rate on a T-bond?

Suppose that the nominal interest rate is 4.2%, the real interest rate is 2.8%, real GDP...

Suppose that the nominal interest rate is 4.2%, the real interest rate is 2.8%, real GDP grows at 1%, and this year's money supply is $11.438B. To the nearest million, the size of next year's money supply will be $________B.

Question