Question

Suppose you observe the following effective annual zero-coupon bond yields: 5.08% (1-year), 4.55% (2-year), 3.97% (3-year). Compute r 0(2,3), the 1-year implied forward rate for year 3.

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Answer #1

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You observe the following term structure:
Effective Annual YTM
1-year zero-coupon bond
5.6
%
2-year zero-coupon bond
5.7
3-year zero-coupon bond
5.8
4-year zero-coupon bond
5.9
a. If you believe that the term structure next
year will be the same as today’s, calculate the return on (i) the
1-year zero and (ii) the 4-year zero. (Do not round
intermediate calculations. Round your answers to 1 decimal
place.)
b. Which bond provides a greater expected 1-year
return?
1-year zero-coupon bond
4-year...

You observe the following term structure:
Effective Annual
YTM
1-year
zero-coupon bond
6.3
%
2-year
zero-coupon bond
6.4
3-year
zero-coupon bond
6.5
4-year
zero-coupon bond
6.6
a. If you believe that the term structure next
year will be the same as today’s, calculate the return on (i) the
1-year zero and (ii) the 4-year zero. (Do
not round intermediate calculations. Round your
answers to 1 decimal place.)
One year return on 1-year bond
%
One year return on 4-year bond...

You observe the following term structure:
Effective Annual
YTM
1-year
zero-coupon bond
6.1
%
2-year
zero-coupon bond
6.2
3-year
zero-coupon bond
6.3
4-year
zero-coupon bond
6.4
a. If you believe that the term structure next
year will be the same as today’s, calculate the return on (i) the
1-year zero and (ii) the 4-year zero. (Do
not round intermediate calculations. Round your
answers to 1 decimal place.)
One year return on 1-year bond
%
One year return on 4-year bond...

1. The following is a list of
prices for zero-coupon bonds of various maturities. Calculate the
yields to maturity of each bond and the implied sequence of forward
rates.
maturity years: Price of bond
1 943.40
2 898.47
3 847.62
4 792.16
2. [Chapter 15] The current yield curve
for default-free zero-coupon bonds is as follows:
Maturity (Years): YTM%
1 10%
2 11%
3 12%
a. What are the implied
1-year forward rates?
b. Assume that the pure
expectations hypothesis of the term structure...

1. Suppose the yields on government bonds are as follows: 1-year
= .01; 2-year = .02; 3-year = .05. According to the expectations
theory, what is the implied 1-year forward yield on a 1-year
government bond?
2. Suppose we have a zero coupon bond with a yield of 6% and 5
years to maturity, use duration to estimate its price if interest
rates fall by 1%.
3. If the 5-year treasury rate was 2.5% and the 5-year TIPS
yield was...

You observe the following term structure of interest rates
(zero-coupon yields, also called "spot rates"). The spot rates are
annual rates that are semi-annually compounded.
Time to Maturity
Spot Rate
0.5
2.00%
1.0
3.00%
1.5
3.50%
2.0
3.00%
2.5
4.00%
3.0
4.50%
1. Compute the six-month forward curve, i.e. compute
f(0,0.5,1.0), f(0,1.0,1.5), f(0,1.5,2.0), f(0,2.0,2.5), and
f(0,2.5,3.0). Round to six digits after the decimal. Enter
percentages in decimal form, i.e. enter 2.1234% as 0.021234.
In all the following questions, enter percentages in...

The following is a list of prices for zero-coupon bonds of
various maturities. Calculate the yields to maturity of each bond
and the implied sequence of forward rates. (Do not round
intermediate calculations. Round your answers to 2 decimal places .
Omit the "%" sign in your response.
Maturity (Years)
Price of Bond
YTM
Forward Rate
1
$980.90
___%
2
$914.97
___%
____%
3
$843.12
___%
____%
4
$771.76
___%
____%

The yields of four zero-coupon bonds of varying maturities are
as follows:
Maturity YTM
1 6.1%
2 6.2%
3 6.3%
4 6.4%
If you expect the implied term structure to be the same next
year as it is this year, what is the expected return on the 3-year
zero coupon bond over the coming year? Please express your answer
in percent, rounded to the nearest basis point.

The yields of four zero-coupon bonds of varying maturities are
as follows:
Maturity
YTM
1
6.1%
2
6.2%
3
6.3%
4
6.4%
If you expect the implied term structure to be the same next
year as it is this year, what is the expected return on the 1-year
zero-coupon bond over the coming year? Please express your answer
in percent, rounded to the nearest basis point.

The yields of four zero-coupon bonds of varying maturities are
as follows:
Maturity
YTM
1
6.1%
2
6.2%
3
6.3%
4
6.4%
If you expect the implied term structure to be the same next
year as it is this year, what is the expected return on the 1-year
zero-coupon bond over the coming year? Please express your answer
in percent, rounded to the nearest basis point.

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