Suppose the inflation rate is expected to be 6% next year, 4.9% the following year, and 2.9% thereafter. Assume that the real risk-free rate, r*, will remain at 1.7% and that maturity risk premiums on Treasury securities rise from zero on very short-term bonds (those that mature in a few days) to 0.2% for 1-year securities. Furthermore, maturity risk premiums increase 0.2% for each year to maturity, up to a limit of 1.0% on 5-year or longer-term T-bonds.

Calculate the interest rate on 1-year Treasury securities. Round your answer to two decimal places. %

Calculate the interest rate on 2-year Treasury securities. Round your answer to two decimal places. %

Calculate the interest rate on 3-year Treasury securities. Round your answer to two decimal places. %

Calculate the interest rate on 4-year Treasury securities. Round your answer to two decimal places. %

Calculate the interest rate on 5-year Treasury securities. Round your answer to two decimal places.%

Calculate the interest rate on 10-year Treasury securities. Round your answer to two decimal places.%

Calculate the interest rate on 20-year Treasury securities. Round your answer to two decimal places.%

Select the correct yield curve based on these data.

1. The correct sketch is -Select-ABCD .
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5. Suppose a AAA-rated company (which is the highest bond rating a firm can have) had bonds with the same maturities as the Treasury bonds. Estimate what you believe a AAA-rated company's yield curve would look like on the same graph with the Treasury bond yield curve. (Hint: Think about the default risk premium on its long-term versus its short-term bonds.)
   
6. The yield risk curve for the AAA-rated corporate bonds will -Select-rise abovefall belowbe the same as the yield curve for the Treasury securities.
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10. What will be the approximate yield curve of a much riskier lower-rated company with a much higher risk of defaulting on its bonds?
    
11. The yield risk curve of a much riskier lower-rated company will be -Select-abovebelowthe same as the yield curve for the Treasury securities and -Select-abovebelowthe same as the yield curve for the AAA-rated corporate bonds.
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13. are you able to show how to calculate these out?
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A 30-year loan of 1,000 is repaid with payments at the end of each year. Each of the first ten payments equals the amount of interest due. Each of the next ten payments equals 150% of the amount of interst due. Each of the last ten payments is X. The lender charges interest at an annual effective rate of 10%. Calculate X.

1 Suppose the value of the CPI is 1.26 in year one, 1.285 in year two and 1.298 in year three. Assume also that the price of computers increases by 4% between year one and year two, and by another 4% between year two and year three. Between year two and one, and year three and two, the price level is increasing, the inflation rate is _______, and the relative price of computers is _________. (Increase or decrease for the inflation rate and relative price?)

2 If the natural rate of unemployment equals 5% and the actual rate of unemployment equals 2%, then cyclical unemployment equals: ( )

3 Over the period of a year, Alex's nominal GDP decreases by 20% and real GDP decreases by 20%. This implies that, during this time:

The CPI has fallen by less than 20%.

The CPI has remained constant.

The CPI has fallen by more than 20%.

The CPI has risen by less than 20%

4.

Public saving is _____ and national saving is ______.

Ronnie, who is in the 33% tax bracket this year, expects to retire next year and be in the 25% tax bracket. He plans to donate $50,000 to his church. Because he will not have the case available until next year, Ronnie donates land (long term capital gain property) with a basis of $10,000 and fair market value of $50,000 to the church in December of the current year. He reacquires the land for $50,000 in February of next year. Discuss Ronnie's tax objectives and all tax issues related to his actions.

A bond has payments of $100 in one year, $100 the following year, and then $1,100 the year after that. If the discount rate is 6%, what is the Macaulay Duration of this set of payments?

Miller produces luxury water cooler. This is their first year in operation (starting the year with $0 balances). The company produced 10,000 units (started and completed) and sold 9,000 units for $570,000. Miller paid $12 per unit in direct materials and $7 per unit in wages for production workers. Lease payments and utilities on the production facilities amounted to $23,500 and selling & administrative expenses were $18,000. Answer the following questions about Miller.

A.  What is the cost per unit of a water cooler?

B. What is the gross margin per unit of a water cooler?

C. What is the balance in the inventory account before any water coolers were sold?

D. What is the cost of goods sold for the year?

E. What is the cost of inventory on the balance sheet at the end of the year?

F.  What is the net income for the year?

Blue Elk Manufacturing reported sales of $720,000 at the end of last year, but this year, sales are expected to grow by 8%. Blue Elk expects to maintain its current profit margin of 23% and dividend payout ratio of 10%. The following information was taken from Blue Elk’s balance sheet:

Based on the AFN equation, the firm’s AFN for the current year is _____ .

A positively signed AFN value represents:

a.A surplus of internally generated funds that can be invested in physical or financial assets or paid out as additional dividends

b.A shortage of internally generated funds that must be raised outside the company to finance the company’s forecasted future growth

c.A point at which the funds generated within the firm equal the demands for funds to finance the firm’s future expected sales requirements

Because of its excess funds, Blue Elk Manufacturing is thinking about raising its dividend payout ratio to satisfy shareholders. Blue Elk could pay out____ % of its earnings to shareholders without needing to raise any external capital. (Hint: What can Blue Elk increase its dividend payout ratio to before the AFN becomes positive?)

Inflation is expected to be 2.90% this year, 4.45% next year, and 2.00% thereafter. The maturity risk premium is estimated to be 0.08 x (t - 1)%, where t = number of years to maturity. What is the yield on a 7-year Treasury note? Assume a real risk-free rate of 2.40%.

For the current year, Mary sojourned in Canada for 210 days. Also, for the current year, Steve, a long-time resident of Quebec, was living in Canada for the first 210 days in 2020, after which he permanently departed from Canada. Explain how these two individuals will be taxed in Canada.

Calculate the future value in year 12 of a $2,000 deposit in Year 3 and another $4,000 deposit at the end of Year 5 using a 10% compound rate.

$13,406.74

$12,909.82

$12,510.77

$15,007.53