1 year Treasury rates are 2%, while 2 year Treasury rates are 6%. What is the expected 1 year Treasury rate one year from today?

Suppose that the yield curve shows that the one-year bond yield is 6 percent, the two-year yield is 5 percent, and the three-year yield is 5 percent. Assume that the risk premium on the one-year bond is zero, the risk premium on the two-year bond is 1 percent, and the risk premium on the three-year bond is 2 percent.

a. What are the expected one-year interest rates next year and the following year?

The expected one-year interest rate next year = %

The expected one-year interest rate the following year = %

A closed-end fund starts the year with a NAV of $12.55. By year-end, NAV equals $11.36. At the beginning of the year, the fund was selling at a 5% discount to NAV. By the end of the year, the fund is selling at a 1% premium to NAV. The fund paid year-end distributions of income and capital gains of $1.21. What is the rate of return to an investor in the fund during the year?

Round your answer to 4 decimal places. For example, if your answer is 3.205%, then please write down 0.0321.

1) The yield on a one-year Treasury security is 5.8400%, and the two-year Treasury security has a 7.0080% yield. Assuming that the pure expectations theory is correct, what is the market’s estimate of the one-year Treasury rate one year from now? (Note: Do not round your intermediate calculations.)

A. 10.3999%

B. 8.1889%

C.6.9606%

D. 9.3353%

2) Recall that on a one-year Treasury security the yield is 5.8400% and 7.0080% on a two-year Treasury security. Suppose the one-year security does not have a maturity risk premium, but the two-year security does and it is 0.2%. What is the market’s estimate of the one-year Treasury rate one year from now? (Note: Do not round your intermediate calculations.)

A. 7.7849%

B. 8.8748%

C. 6.6172%

D. 9.8868%

3) Suppose the yield on a two-year Treasury security is 5.83%, and the yield on a five-year Treasury security is 6.20%. Assuming that the pure expectations theory is correct, what is the market’s estimate of the three-year Treasury rate two years from now? (Note: Do not round your intermediate calculations.)

A. 6.69%

B. 6.53%

C. 6.45%

D. 7.10%

Weismann Co. issued 17-year bonds a year ago at a coupon rate of 11 percent. The bonds make semiannual payments and have a par value of $1,000. If the YTM on these bonds is 8 percent, what is the current bond price? Multiple Choice • $586.82 • $1,278.10 • $1,718.94 • $1,268.10 • $1,187.49

Hall Company sells merchandise with a one-year warranty. In the current year, sales consisted of 4,500 units. It is estimated that warranty repairs will average $10 per unit sold, and 30% of the repairs will be made in the current year and 70% in the next year. In the current year's income statement, Hall should show warranty expense of

• $13,500
• $31,500
• $0
• $45,000

The half-year LIBOR rate is 3.5% and the one-year LIBOR rate is 6%. Suppose that some time ago a company entered into an FRA where it will receive 5.8% and pay LIBOR on a principal of $1 million for the period between time 0.5 years and time 1 year in the future (with semiannual compounding). The one-year risk-free rate is 4%. What is the value of the FRA? All rates are compounded continuously unless specified.

Formula for Problem

W1 in year 1; W2 in year 2 only to those retained W1 < W2

• Value of E-types applying = W1 + q•W2 + (1–q)•WE

• Alternative for E-types = 2•WE

• Value of D-types applying = W1 + (1-q)•W2 + q•WD

• Alternative for D-types = 2•WD

1. Lorne Roberts Corp. has invested a lot of money in their employee screening process over the last few years for computer technicians. This company can assess whether to promote employees on probation accurately 90% of the time. But 10% of the time the company still inaccurately assesses employees on probation by terminating an employee who fits successfully in the job or promoting an employee who does not fit well in the job.

The WD for computer technicians is $30,000 per year. The WE for this position is $40,000.

Lorne Roberts Corp. is considering which W1 and W2 will encourage E’s to apply while discouraging D’s from applying. Out of the three options below, which is the best salary structure for the first two years:

A) W1 = $30,000; W2 = $42,000

B) W1 = $40,000; W2 = $52,000

C) W1 = $24,000; W2 = $59,000