Excel Online Structured Activity: Expectations TheoryInterest rates on 4-year Treasury securities are currently 6.5%, while 6-year Treasury securities yield 7.7%. The data has been collected in the Microsoft Excel Onlinefile below. Open the spreadsheet and perform the required analysis to answer the question below.XOpen spreadsheetIf the pure expectations theory is correct, what does the market believe that 2-year securities will be yielding 4 years from now? Calculate the yield using a geometricaverage. Do not round your intermediate calculations. Round your answer to two decimal places.%

Under pure expectation theory that shape of the yield curve will be the market's expectation of…

If the pure expectations theory is correct, what does the market believe that 2-year securities will be yielding 4 years from now? Calculate the yield using a geometric average. Do not round your intermediate calculations. Round your answer to two decimal places.

If the pure expectations theory is correct, what does the market believe that 2-year securities will be yielding 4 years from now? Calculate the yield using a geometric average. Do not round your intermediate calculations. Round your answer to two decimal places.

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Bond valuation related problems should be solved by using a financial calculator or MS excel spreadsheet. Accordingly, you must show the values of all relevant time valu of money variables If D1 = $1.50 g (which is constant) = 6.5%, Po = $56, what is the stock's expected capital gains yield for the coming year?
Excel Online Structured Activity: Historical Return: Expected and Required Rates of Return You have observed the following returns over time: Year Stock X Stock Y Market 2011 14 % 12 % 10 % 2012 20 7 9 2013 -13 -2 -13 2014 3 1 2 2015 19 9 12 Assume that the risk-free rate is 4% and the market risk premium is 6%. The data has been collected in the Microsoft Excel Online file below. Open the spreadsheet and perform the required analysis to answer the questions below. Open spreadsheet What is the beta of Stock X? Do not round intermediate calculations. Round your answer to two decimal places. fill in the blank 2 What is the beta of Stock Y? Do not round intermediate calculations. Round your answer to two decimal places. fill in the blank 3 What is the required rate of return on Stock X? Do not round intermediate calculations. Round your answer to one decimal place. fill in the blank 4 % What is the required rate of return on Stock…
Bond valuation related problems should be solved by using a financial calculator or MS excel spreadsheet. Accordingly, you must show the values of all relevant time valu of money variables If D1 = $1.25, g(which is constant) = 4.7%, and Po= $26.00 what is the stocks expected dividend yield for the coming year?
Bond valuation related problems should be solved by using a financial calculator or MS excel spreadsheet. Accordingly, you must show the values of all relevant time valu of money variables Tasla stock recently paid a dividend of $0.75. The required rate of return is ke or rs = 10.5%, and the expected constant growth rate is g = 6.4%. What is the stock's current price?
Historical Returns: Expected and Required Rates of Return You have observed the following returns over time: Assume that the risk-free rate is 5% and the market risk premium is 4%. a. What are the betas of Stocks X and Y? Do not round intermediate calculations. Round your answers to two decimal places. % Year 2017 2018 2019 2020 2021 % Stock X 12% 17 -13 2 22 % Stock Y 15% 7 -4 3 12 Stock X: Stock Y: b. What are the required rates of return on Stocks X and Y? Do not round intermediate calculations. Round your answers to two decimal places. Stock X: Stock Y: c. What is the required rate of return on a portfolio consisting of 80% of Stock X and 20% of Stock Y? Do not round intermediate calculations. Round your answer to two decimal places. Market 13% 12 -10 2 15
8. Demonstrate your understanding on Chapter 6: Expectations Theory/ Cross-Product a. One-year Treasury securities yield 3.95%. The market anticipates that 1 year from now, 1-year Treasury securities will yield 4.4%. 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 intermediate calculations. Round your answer to two decimal places. b. An analyst is evaluating securities in a developing nation where the inflation rate is very high. As a result, the analyst has been warned not to ignore the cross-product between the real rate and inflation. A 6-year security with no maturity, default, or liquidity risk has a yield of 17.60%. If the real risk-free rate is 5%, what average rate of inflation is expected in this country over the next 6 years? (Hint: Refer to "The Links Between Expected Inflation and Interest Rates: A Closer Look".) Do not round intermediate calculations. Round your…
Excel Online Structured Activity: Bond valuation An investor has two bonds in her portfolio, Bond C and Bond Z. Each bond matures in 4 years, has a face value of $1,000, and has a yield to maturity of 9.4%. Bond C pays a 10% annual coupon, while Bond Z is a zero coupon bond. The data has been collected in the Microsoft Excel Online file below. Open the spreadsheet and perform the required analysis to answer the questions below. Open spreadsheet Assuming that the yield to maturity of each bond remains at 9.4% over the next 4 years, calculate the price of the bonds at each of the following years to maturity. Do not round intermediate calculations. Round your answers to the nearest cent. Years to Maturity Price of Bond C Price of Bond Z 4 $  fill in the blank? $  fill in the blank? 3 $  fill in the blank? $  fill in the blank? 2 $  fill in the blank? $  fill in the blank? 1 $  fill in the blank? $  fill in the blank? 0 $  fill in the blank? $  fill in the…
Excel Online Structured Activity: Bond valuation An investor has two bonds in her portfolio, Bond C and Bond Z. Each bond matures in 4 years, has a face value of $1,000, and has a yield to maturity of 8.3%. Bond C pays a 10.5% annual coupon, while Bond Z is a zero coupon bond. The data has been collected in the Microsoft Excel Online file below. Open the spreadsheet and perform the required analysis to answer the questions below. Assuming that the yield to maturity of each bond remains at 8.3% over the next 4 years, calculate the price of the bonds at each of the following years to maturity. Do not round intermediate calculations. Round your answers to the nearest cent. Years to Maturity Price of Bond C Price of Bond Z 4 $   $   3 $   $   2 $   $   1 $   $   0 $   $
1.  Problem 6.08 (Expectations Theory) eBook Interest rates on 4-year Treasury securities are currently 5.1%, while 6-year Treasury securities yield 7.85%. If the pure expectations theory is correct, what does the market believe that 2-year securities will be yielding 4 years from now? Calculate the yield using a geometric average. Do not round intermediate calculations. Round your answer to two decimal places.   % 2.  Problem 6.09 (Expected Interest Rate) eBook The real risk-free rate is 3.05%. Inflation is expected to be 4.05% this year, 4.15% next year, and 2.4% thereafter. The maturity risk premium is estimated to be 0.05 × (t - 1)%, where t = number of years to maturity. What is the yield on a 7-year Treasury note? Do not round intermediate calculations. Round your answer to two decimal places.   % 3.  Problem 6.10 (Inflation) eBook Due to a recession, expected inflation this year is only 3.75%. However, the…
you have observed the following returns over time: Year Stock X Stock Y Market 2011 13 % 12 % 13 % 2012 18 7 10 2013 -12 -6 -10 2014 2 1 2 2015 19 9 16 Assume that the risk-free rate is 5% and the market risk premium is 6%. The data has been collected in the Microsoft Excel Online file below. Open the spreadsheet and perform the required analysis to answer the questions below. Open spreadsheet What is the beta of Stock X? Do not round intermediate calculations. Round your answer to two decimal places. fill in the blank 2 What is the beta of Stock Y? Do not round intermediate calculations. Round your answer to two decimal places. fill in the blank 3 What is the required rate of return on Stock X? Do not round intermediate calculations. Round your answer to one decimal place. fill in the blank 4 % What is the required rate of return on Stock Y? Do not round intermediate calculations. Round your answer to one decimal place. fill…
One-year Treasury securities yield 3.25%. The market anticipates that 1-year from now, 1-year Treasury securities will yield 4.48%. If the pure expectations theory is correct, what is the yield today for 2-year Treasury securities/ Calculate the yield using the arithmetic average. State your answer as a percentage to 2 decimal places. Do not include the % symbol. Give typing answer with explanation and conclusion
Suppose you observe the following situation: Security Ruby Pearl Expected Return 14.9% 21.0% Beta 0.70 2.13 A). If these two securities are correctly priced, calculate the risk-free rate. Round your answer to 4 decimal points. B). If these two securities are correctly priced, find the market risk premium (using the findings of Requirement-A). Round your answer to 4 decimal points. C). If the current market data shows that the risk-free rate is 3.52 percent, are these securities fairly priced? Comment on your answer. Round your answers to 4 decimal points. D). Calculate the expected return and beta of an equally weighted portfolio of these two securities. Round your answers to 3 decimal points.

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