Question
In: Finance
Forward Rate. a. Assume that as of today, the annualized two-year interest rate is 0.1 ,...
Forward Rate. a. Assume that as of today, the annualized two-year interest rate is 0.1 , while the one-year interest rate is 0.07. Assume that the liquidity premium on a two-year security is 0.003. Use this information to re-estimate the one-year forward rate. Enter the answer in decimal form using 4 decimals (e.g. 0.1234)
Solutions
Expert Solution
One Year forward rate one year =(1+2 year rate)^2/(1+1 year
rate)-1-Liquidity Premium/(1+One year rate)
=(1+0.1)^2/(1+0.07)-1-0.003/(1+0.07)=0.1280
jeff jeffy answered 2 years agoRelated Solutions
Forward Rate. a. Assume that as of today, the annualized two-year interest rate is 0.11 ,...
Forward Rate. a. Assume that as of today, the
annualized two-year interest rate is 0.11 , while the one-year
interest rate is 0.02. Use only this information to estimate the
one-year forward rate. Enter the answer in decimal form using 4
decimals (e.g. 0.1234)
Forward Rate. Assume that as of today, the annualized interest rate on a three-year security is...
Forward Rate. Assume that as of today, the
annualized interest rate on a three-year security is 0.12, while
the annualized interest rate on a two-year security is 0.03. Use
only this information to estimate the one-year forward rate two
years from now. Enter the answer in decimal form using 4 decimals
(e.g. 0.1234)
Assume that as of today, the annualized interest rate on a three-year security is 2 percent,...
Assume that as of today, the annualized interest rate on a
three-year security is 2 percent, while the annualized interest
rate on a two-year security is 1.25 percent. Use this information
to estimate the one-year forward rate two years from now.
Assume that interest rate parity exists. If the forward rate is an unbiased forecast of the...
Assume that interest rate parity exists. If the forward rate is
an unbiased forecast of the future spot rate , explain the
implications from borrowing a foreign currency (versus local
financing) over time.
Today, the continuous compound interest rate is 0.1% and one share of Amazon is $2367.92. 1....
Today, the continuous compound interest rate is 0.1% and one
share of Amazon is $2367.92.
1. What price do you expect Amazon to be 6 months from now? What
European style option should you buy in this case? Your future
price can’t be a whole dollar, everyone should have different
future stock price.
2. Assume the volatility of Amazon is 27% and you set your own
strike price to 2 decimal places, find out how much your option in
part...
Today, the continuous compound interest rate is 0.1% and one share of Amazon is $2367.92. 1....
Today, the continuous compound interest rate is 0.1% and one
share of Amazon is $2367.92.
1. What price do you expect Amazon to be 6 months from now? What
European style option should you buy in this case? Your future
price can’t be a whole dollar, everyone should have different
future stock price.
2. Assume the volatility of Amazon is 27% and you set your own
strike price to 2 decimal places, find out how much your option in
part...
Assume the following information regarding U.S. and Canadian annualized interest rates: Currency Lending Rate Borrowing Rate...
Assume the following information regarding U.S. and Canadian
annualized interest rates:
Currency
Lending Rate
Borrowing Rate
U.S Dollar ($)
5.89%
6.35%
Canadian Dollar (C$)
5.6%
6%
Piggy Bank can borrow either $20 million or C$30 million.
Furthermore, Piggy Bank expects the spot rate of the Canadian
dollar to be $0.82 in 60 days (the current spot rate is $0.80).
8.
What is the profit or loss from Piggy Bank's speculation if the
spot rate 60 days from now is indeed...
The interest rate on a one-year bond selling today is 3% and the interest rate on...
The interest rate on a one-year bond selling today is 3% and the
interest rate on a two-year bond selling today is 4%. According to
expectations theory people expect the interest rate on a one-year
bond selling one year from today to be about
Suppose the interest rate on a one-year bond today is 6% per year, the interest rate...
Suppose the interest rate on a one-year bond today is 6% per
year, the interest rate on a one-year bond one year from now is
expected to be 4% per year, and the interest rate on a one-year
bond two years from now is expected to be 3% per year. Assuming
risk neutral investors, what is the interest rate today on a
two-year bond?
On a three-year bond?
What is the shape of the yield curve?
You invest $1000 today. If that money grows at an annualized rate of 2% for the...
You invest $1000 today. If that money grows at an annualized
rate of 2% for the next 7 months and then at an annualized rate of
16% for the next 3 months after that, how much will your investment
grown to by the end of the 2nd period. Assume you made no
withdrawals or additional investments.
ADVERTISEMENT
ADVERTISEMENT
Latest Questions
- Samsung Industry that requires you to act as a change agent to form an organizational change...
- Use fork() Create a program that reads characters from an input file. Use fork to create...
- A pension fund manager is considering three mutual funds. The first is a stock fund, the...
- Compute the cost of not taking the following cash discounts. (Use a 360-day year. Do not...
- During his project presentation, Bob falls sick and performs poorly. However, his colleague, Dan, concludes that...
- A sample human input file that contains test values that a human would enter on the...
- A solution is prepared by dissolving 15 ml of methanol in 150.0 ml water at 25...
ADVERTISEMENT