Suppose that the current one-year rate (one-year spot rate) and expected one-year T-bill rates over the following three years (i.e., years 2, 3, and 4, respectively) are as follows: 1R1 = 0.4%, E(2r 1) = 1.4%, E(3r1) = 1.9%, E(4r1) = 2.25% Using the unbiased expectations theory, calculate the current (long-term) rates for one-, two-, three-, and four-year-maturity Treasury securities. (Round your answers to 3 decimal places. (e.g., 32.161))
In: Finance
One-year Treasury securities yield 2.05%. The market anticipates that 1 year from now, 1-year Treasury securities will yield 2.5%. If the pure expectations theory is correct, what is the yield today for 2-year Treasury securities? Calculate the yield using a geometric average. Do not round intermediate calculations. Round your answer to two decimal places.
%
In: Finance
One-year Treasury securities yield 2.75%. The market anticipates that 1 year from now, 1-year Treasury securities will yield 3.6%. If the pure expectations theory is correct, what is the yield today for 2-year Treasury securities? Calculate the yield using a geometric average. Do not round intermediate calculations. Round your answer to two decimal places.
In: Finance
In: Finance
Currently the term structure is as follows:
One-year spot rate 2%
Two-year spot rate 3%
Three-year spot rate 4%
You have a one-year investment horizon one-, two-, and three-year zero coupon bonds are available.
a. Which bonds should you buy if you strongly believe that at year-end the term structure remains
unchanged (i.e., one, two, and three year spot rates remain the same)?
b. Redo part (a) assuming at year-end the term structure shifts as follows:
One-year spot rate 6%
Two-year spot rate 7%
Three-year spot rate 8%
c. What conclusion(s) can you make by comparing the results of parts (a) and (b) above?
In: Accounting
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Suppose that the current one-year rate (one-year spot rate) and expected one-year T-bill rates over the following three years (i.e., years 2, 3, and 4, respectively) are as follows: |
| 1R1 = 0.5%, E(2r 1) = 1.5%, E(3r1) = 9.9%, E(4r1) = 10.25% |
|
Using the unbiased expectations theory, calculate the current (long-term) rates for one-, two-, three-, and four-year maturity Treasury securities. (Round your answers to 3 decimal places. (e.g., 32.161)) |
| Current (Long-Term) Rates |
|
| One-year | % |
| Two-year | % |
| Three-year | % |
| Four-year | % |
In: Finance
Currently, the term structure is as follows: One-year bonds yield 12.00%, two-year bonds yield 13.00%, three-year bonds and greater maturity bonds all yield 14.00%. You are choosing between one-, two-, and three-year maturity bonds all paying annual coupons of 13.00%, once a year. You strongly believe that at year-end the yield curve will be flat at 14.00%.
a. Calculate the one year total rate of return for the three bonds. (Do not round intermediate calculations. Round your answers to 2 decimal places.)
| One Year | Two Years | Three Years | ||||
| One year total rate of return | % | % | % | |||
b. Which bond you would buy?
| One-year bond | |
| Two-year bond | |
| Three-year bond |
In: Finance
| Year | Average Stock Price | Year Open | Year Close |
| 2020 | 294.2787 | 300.35 | 331.5 |
| 2019 | 208.2559 | 157.92 | 293.65 |
| 2018 | 189.0534 | 172.26 | 157.74 |
| 2017 | 150.5511 | 116.15 | 169.23 |
| 2016 | 104.604 | 105.35 | 115.82 |
| 2015 | 120.0385 | 109.33 | 105.26 |
| 2014 | 92.2646 | 79.0186 | 110.38 |
| 2013 | 67.5193 | 78.4329 | 80.1457 |
| 2012 | 82.2928 | 58.7471 | 76.0247 |
| 2011 | 52.0006 | 47.0814 | 57.8571 |
| 2010 | 37.1203 | 30.5729 | 46.08 |
| 2009 | 20.9736 | 12.9643 | 30.1046 |
| 2008 | 20.2827 | 27.8343 | 12.1929 |
| 2007 | 18.3249 | 11.9714 | 28.2971 |
| 2006 | 10.116 | 10.6786 | 12.12 |
| 2005 | 6.668 | 4.5207 | 10.27 |
| 2004 | 2.5376 | 1.52 | 4.6 |
| 2003 | 1.3245 | 1.0571 | 1.5264 |
| 2002 | 1.3671 | 1.6643 | 1.0236 |
| 2001 | 1.4442 | 1.0629 | 1.5643 |
In: Statistics and Probability
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Cost of Owning—Anywhere Clinic—Comparative Present Value |
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|
For-Profit Cost of Owning: |
Year 0 |
Year 1 |
Year 2 |
Year 3 |
Year 4 |
Year 5 |
|
Net Cash Flow |
(48,750) |
2,500 |
2,500 |
2,500 |
2,500 |
5,000 |
|
Present value factor |
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|
Present value answers = |
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|
Present value cost of owning = |
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Cost of Leasing—Anywhere Clinic—Comparative Present Value |
||||||
|
For-Profit Cost of Leasing: |
Year 0 |
Year 1 |
Year 2 |
Year 3 |
Year 4 |
Year 5 |
|
Net Cash Flow |
(8,250) |
(8,250) |
(8,250) |
(8,250) |
(8,250) |
— |
|
Present value factor |
— |
|||||
|
Present value answers = |
||||||
|
Present value cost of leasing = |
||||||
Record the preset value factor at 10% for each year and compute the preset value cost of owning and the preset value of leasing. Which alternative is more desirable at this rate? do you think your answer would change if the interest rate was 6% instead of 10%
In: Finance
|
Cost of Owning—Anywhere Clinic—Comparative Present Value |
||||||
|
For-Profit Cost of Owning: |
Year 0 |
Year 1 |
Year 2 |
Year 3 |
Year 4 |
Year 5 |
|
Net Cash Flow |
(48,750) |
2,500 |
2,500 |
2,500 |
2,500 |
5,000 |
|
Present value factor |
||||||
|
Present value answers = |
||||||
|
Present value cost of owning = |
||||||
|
Cost of Leasing—Anywhere Clinic—Comparative Present Value |
||||||
|
For-Profit Cost of Leasing: |
Year 0 |
Year 1 |
Year 2 |
Year 3 |
Year 4 |
Year 5 |
|
Net Cash Flow |
(8,250) |
(8,250) |
(8,250) |
(8,250) |
(8,250) |
— |
|
Present value factor |
— |
|||||
|
Present value answers = |
||||||
|
Present value cost of leasing = |
||||||
Record the preset value factor at 10% for each year and compute the preset value cost of owning and the preset value of leasing. Which alternative is more desirable at this rate? do you think your answer would change if the interest rate was 6% instead of 10%
In: Finance