The annual payment of a 10-year fixed-income security is $50. The payments are made at the end of each year. The market-required rate of return is 10%. What is the current price of the securities?
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The annual payment of a 10-year fixed-income security is $50. The payments are made at the end of each year. The market-required
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- Assume that as of today, the annualized interest rate on a three-year security is 3 percent, while the annualized interest rate on a two-year security is 2.15 percent. Use this information to estimate the one-year forward rate two years from now.A 2-year Treasury security currently earns 1.79 percent. Over the next two years, the real risk-free rate is expected to be 1.35 percent per year and the inflation premium is expected to be 0.35 percent per year. Calculate the maturity risk premium on the 2-year Treasury security. (Round your answer to 2 decimal places.) Maturity risk premium ____.__%Security A pays $100 annually forever, starting at the end of this year. Security B pays $100 annually forever, starting at the end of this year, and grows at a rate (g) of 3% annually. If the interest rate decreases from 10% to 6%, what will happen to the present value of these two securities? The present value of Security B will increase more than the present value of Security A O The present value of Security B will decrease more than the present value of Security A O The present value of Security A will decrease more than the present value of Security B O We do not have enough information O The present value of Security A will increase more than the present value of Security B Question 10 You plan to invest the same amount of dollars in your retirement account for the next 40 years, starting at the end of this year. You think that you will need $1,345,989.12 in your account at that point in time. How much should you invest every year, given that the market offers an interest rate…
- A 2-year Treasury security currently earns 1.77 percent. Over the next two years, the real risk-free rate is expected to be 1.30 percent per year and the inflation premium is expected to be 0.30 percent per year. Calculate the maturity risk premium on the 2-year Treasury security. (Round your answer to 2 decimal places.)A two year treasury security currently earns 1.77%. Over the next two years, the real risk free rate is expected to be 1.30% per year and the inflation premium is expected to be 0.30% per year. Calculate the maturity risk premium on the two-year treasury security.A 2-year Treasury security currently earns 1.94 percent. Over the next two years, the real risk-free rate is expected to be 1.00 percent per year and the inflation premium is expected to be 0.50 percent per year. Calculate the maturity risk premium on the 2-year Treasury security.
- Which of the following investments that pay will $18,500 in 8 years will have a higher price today? The security that earns an interest rate of 8.50%. The security that earns an interest rate of 12.75%.Consider a fixed-payment security that pays P100 at the end of every year for the three years. If the rate of discount is 10 percent, the present value of the bond isThe maturity risk premium is a function of the default risk premium and the number of years for the security to mature. The applicable risk-free rate component of 5-year securities is 7.5%. Default risk premium is 1.5%. Determine the nominal rate of the long-term 5-year government security. (In percentage)
- You purchase a three-month discount security (e.g., a Treasury bill or commercial paper) for $0.9878 on $1 (i.e., $98,780 for $100,000 face amount). What are the discount yield, the simple annual yield, and the annual compound yield earned by the investment?You buy a bond that pays annual interest payments of 7% of the bond’s face value of $1000. You initially pay $950 for the bond. You receive an annual interest payment after one year, then sell the bond for $880. What is your total rate of return on the investment, expressed as a percentage of the purchase price?Which of the following investments that pay will $9,500 in 14 years will have a lower price today? The security that earns an interest rate of 5.50%. The security that earns an interest rate of 8.25%.