Question
In: Finance
Use the following information on government bond yields for Questions 1-5. Time Period Rate “0y1y” 4%...
Use the following information on government bond yields for Questions 1-5.
Time Period Rate
“0y1y” 4%
“0y2y” 5%
“0y3y” 6%
“0y4y” 7%
“0y5y” 8%
4. You are considering the purchase of a government bond that will pay you $1000 in exactly 5 years. Given the rates in the table above, what do you expect the bond’s value to be in exactly 1 year?
Solutions
Expert Solution
To value the government bond 1 year from now we need to compute the 4 year Forward rate 1 year from now
(1 + 5 year spot rate)5 = (1 + 1 year spot rate) * (1 + forward rate)4
(1 + 8%)5 = (1 + 4%) * (1 + forward rate)4
(1 + forward rate)4 = (1 + 8%)5 / (1 + 4%)
(1 + forward rate)4 = 1.4128
(1 + forward rate) = 1.090238
forward rate = 9.0238%
4 year Forward rate 1 year from now = 9.0238%
Value of the Government Bond exactly 1 year from now = Payment in 5 years / (1 + 4 year Forward rate 1 year from now)4
Value of the Government Bond exactly 1 year from now = $1000 / (1 + 9.0238%)4
Value of the Government Bond exactly 1 year from now = $707.81
jeff jeffy answered 2 years agoRelated Solutions
5. Use a=0.05 to test the following time series for positive autocorrelation. Period Sales 1 4...
5. Use a=0.05 to test the following time series for positive
autocorrelation.
Period Sales
1 4
2 7
3 11
4 10
5 10
6 11
7 14
8 16
9 12
10 13
11 19
12 12
13 14
14 16
15 15
a. Determine the Durbin-Watson statistic. (Round to two
decimal places as needed.)
b. Identify the critical values. dL=?
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5. Use a=0.05 to test the following time series for positive
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Period Sales
1 4
2 7
3 11
4 10
5 10
6 11
7 14
8 16
9 12
10 13
11 19
12 12
13 14
14 16
15 15
a. Determine the Durbin-Watson statistic. (Round to two
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Use the following time-series data to answer the given questions. Time Period Value 1 27 2...
Use the following time-series data to answer the given
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86 9 101 10 97 a. Develop forecasts for periods 5 through 10 using
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Use the following time-series data to answer the given questions. Time Period Value 1 27 2...
Use the following time-series data to answer the given
questions.
Time Period
Value
1
27
2
30
3
58
4
63
5
59
6
67
7
70
8
86
9
101
10
97
a. Develop forecasts for periods 5 through 10
using 4-month moving averages.
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using 4-month weighted moving averages. Weight the most recent
month by a factor of 4, the previous month by 2, and the other
months by 1.
c....
Use the following time-series data to answer the given questions. Time Period Value 1 26 2...
Use the following time-series data to answer the given
questions.
Time Period
Value
1
26
2
30
3
57
4
62
5
58
6
65
7
70
8
86
9
101
10
97
a. Develop forecasts for periods 5 through 10
using 4-month moving averages.
b. Develop forecasts for periods 5 through 10
using 4-month weighted moving averages. Weight the most recent
month by a factor of 4, the previous month by 2, and the other
months by 1.
c....
Use the following time-series data to answer the given questions. Time Period Value 1 -25 2-...
Use the following time-series data to answer the given
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1 -25
2- 32
3 -59
4- 62
5- 59
6 -65
7 -70
8 -86
9 -101
10- 97
a. Develop forecasts for periods 5 through 10 using 4-month
moving averages. b. Develop forecasts for periods 5 through 10
using 4-month weighted moving averages. Weight the most recent
month by a factor of 4, the previous month by 2, and the other
months by 1. c....
Use the following time-series data to answer the given questions. Time Period Value 1 25 2...
Use the following time-series data to answer the given
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86 9 101 10 97 a. Develop forecasts for periods 5 through 10 using
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Questions 4-8 USE THE FOLLOWING INFORMATION TO ANSWER THE NEXT (5) QUESTIONS: Pitchfork, Inc. sold merchandise...
Questions 4-8 USE THE FOLLOWING INFORMATION TO ANSWER
THE NEXT (5) QUESTIONS:
Pitchfork, Inc. sold merchandise to Min Corporation on June 1,
2019 and accepted an interest-bearing note with an 8% APR. Min
agreed to make annual payments of P&I in the amount of $27,000
per year for 5 years with the first payment being made
immediately. The remaining payments are to be
remitted each June 1st. Pitchfork’s year-end is December
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Required:...
All Treasury yields are at 1%. I long a 30-yr treasury bond, coupon rate = 5%....
All Treasury yields are at 1%.
I long a 30-yr treasury bond, coupon rate = 5%.
If yield increases by 2%, calculate the dollar change in value
using the modified duration, and the change is called delta p1.
Calculate the exact dollar change by the exact new price - the
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What is delta p1 - delta p2? (Should be in units of dollars)
Use the following information about a hypothetical government security dealer named J.P. Groman. (Market yields are...
Use the following information
about a hypothetical government security dealer named J.P. Groman.
(Market yields are in parentheses; amounts are in millions.)
Assets
Liabilities and Equity
Cash
$
19
Overnight repos
$
200
1-month T-bills
(7.14%)
93
Subordinated
debt
3-month T-bills
(7.34%)
93
7-year fixed
(8.64%)
159
2-year T-notes
(7.59%)
59
8-year T-notes
(9.05%)
109
5-year munis
(floating rate)
(8.29% reset every six month)
34
Equity
48
Total
$
407
Total
$
407
a.
What is the repricing or...
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