Question

"One-year Treasury bills currently earn 2.90 percent. You expect that one year from now, one-year Treasury bill rates will increase to 3.35 percent. The liquidity premium on two-year securities is 0.085 percent. If the liquidity theory is correct, what should the current rate be on two-year Treasury securities (Round the percentage answer to 2 decimal places)?"

3.12% |
||

3.13% |
||

Not possible to compute with the data provided |
||

2.11% |
||

3.17% |

Answer #1

Sol:

One-year Treasury bills current rate = 2.90%

One year from now, expect one-year Treasury bill rates will increase to 3.35%

The liquidity premium (LP) on two-year securities is 0.085%

To determine current rate be on two-year Treasury securities:

Two year security rate = [(1 + One-year Treasury bills current rate) x (1 + Expect one-year Treasury bill rates + LP)]^0.5 - 1

Two year security rate = [(1 + 2.90%) x (1 + 3.35% + 0.085%)]^0.5 - 1

Two year security rate = [(1 + 0.0290) x (1.0335 + 0.00085)]^0.5 - 1

Two year security rate = (1.0290 x 1.03435)^0.5 - 1

**Two year security rate = 1.031672 - 1 = 0.031672 or
3.17%**

**Therefore current rate be on two-year Treasury
securities is 3.17%**

HOW DO I ENTER THIS PROBLEM INTO EXCEL?
One-year Treasury bills currently earn 4.10 percent. You expect
that one year from now, 1-year Treasury bill rates will increase to
4.30 percent. The liquidity premium on 2-year securities is 0.08
percent. If the liquidity premium theory is correct, what should
the current rate be on 2-year Treasury securities?

Unbiased Expectations Theory One-year Treasury bills currently
earn 5.30 percent. You expect that one year from now, one-year
Treasury bill rates will increase to 5.45 percent. If the unbiased
expectations theory is correct, what should the current rate be on
two-year Treasury securities?

Unbiased Expectations Theory One-year Treasury
bills currently earn 4.50 percent. You expect that one year from
now, one-year Treasury bill rates will increase to 4.65 percent. If
the unbiased expectations theory is correct, what should the
current rate be on two-year Treasury securities?
4.5000%
9.1500%
4.5750%
4.6500%

Suppose that the interest rate on a one-year Treasury bill is
currently 7% and that investors expect that the interest rates on
one-year Treasury bills over the next three years will be 8%, 9%,
and 7%. Use the expectations theory to calculate the current
interest rates on two-year, three-year, and four-year Treasury
notes. The current interest rate on two-year Treasury notes
is______%.
(Round your response to two decimal places.)The
current interest rate on three-year Treasury notes is
______%.
(Round your...

Question 1.)
One-year Treasury securities yield 4.55%. The market anticipates
that 1 year from now, 1-year Treasury securities will yield 5.7%.
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 your intermediate calculations.
Round your answer to two decimal places.
Question 2.)
A Treasury bond that matures in 10 years has a yield of 5.25%. A
10-year corporate bond has a yield of...

One
year treasury securities yield 2% the market anticipates that one
year from now when year treasury securities will yield 5.85% if the
pure expect Tatian's theory is correct what is the deal today for
two year treasury securities Kathy do you like the yield using a
geometric Average

One-year government bonds yield 6.9 percent and 3-year
government bonds yield 3.8 percent.
Assume that the expectations theory holds. What does
the market believe the rate on 2-year
government bonds will be one year from today?
2.05%
2.45%
2.35%
2.15%
2.25%
The real risk-free rate of interest is 3
percent. Inflation is expected to be 2 percent this
coming year, jump to 3 percent next year, and increase to 4
percent the year after (Year 3).
According to the expectations theory, what...

EXPECTATIONS
THEORY
One-year Treasury
securities yield 3.65%. The market anticipates that 1 year from
now, 1-year Treasury securities will yield 5.55%. 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 your intermediate calculations. Round your answer to
two decimal places.
___%
EXPECTED
INTEREST RATE
The real risk-free
rate is 2.45%. Inflation is expected to be 3.25% this year, 3.6%
next year, and 2.2%...

B. J. Gautney Enterprises is evaluating a security. One-year
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investment's expected return and its standard deviation. Should
Gautney invest in this security?
Probability
Return
0.20
−5
%
0.50
1
%
0.10
5
%
0.20
10
%
The investment's expected return is ____(Round to two decimal
places.)
b. The investment's standard deviation is ______(Round to two
decimal places.)
c. Should Gautney invest in this security? (Select the best
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A....

Assume the current interest rate on a one-year Treasury bond
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please show how to do in excel

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