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  • Jul 23, 2009, 01:35 PM
    okewori
    Interest rate level
    1. Treasury bond that matures in 10 years has yield of 6%. A 10 year corporate bond has a yield of 8%. Assume that the liquidity premium on the corporate bond is 0.5%. What is the DRP on the corporate bond?

    2.Interest rates on 4-year Treasury securities are currently7%, while 6-year Treasury securities yield 7.5%. If the pure expectations theory is correct, what does the market believe that 2-year securities will be yielding 4 years from now?

    3.The real risk-free rate is 3%. Inflation is expected to be 3% this year, 4% next year, and then3.5% thereafter. The maturity risk premium is estimated to be 0.05 X (t - 1)%, where t = number of years to maturity. What is the yield on a 7-year Treasury note?
  • Jul 23, 2009, 02:49 PM
    ArcSine
    okewori, you must've stepped out for coffee part way through your post, and then forgot to come back and finish it. Go spend a little quality time with the "homework help" rules, then have another go at it.

    Explain your understanding of the question, what you've done so far, and where exactly you're left scratching your head--and you'll get excellent guidance from the folks here.

    Otherwise, the only possible answer is, "Go re-read your textbook."

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