#9. One-year Treasury bills currently earn 3.45 percent. You expect that one year from now, one-year Treasury bill rates will increase to 4.25 percent. If the unbiased expectations theory is correct, what should the current rate be on two-year Treasury securities?
#22. Calculate the present value of $5,000 received five years from today if your investments pay:
a. 6 percent compounded annually
b. 8 percent compounded annually
c. 10 percent compounded annually
d. 10 percent compounded seminnually
e. 10 percent compounded quarterly
What do your answers to these questions tell you about the relation between present values and interest rates and between present values and the number of compunding periods per year?
#23. Calculate the future value in five years of $5,000 received today if your investments pay:
a. 6 percent compounded annually
b. 8 percent compounded annually
c. 7.5 percent compounded annually
d. 7.5 percent compounded seminnually
e. 7.5 percent compounded quarterly
What do your answers to these questions tell you about the relation between future values and interest rates and between future values and the number of compunding periods per year?
#29. How much money would you have to deposit today in order to have $2,000 in four years if the discount rate is 6.5 percent per year?
#31. You can save $1,000 per year for the next six years in an account earning 10 percent per year. How much will you have at the end of the sixth year if you make the first deposit today?
#32. What are the current CD yields for 3mo, 6mo, 1 yr, 3yr and 5 yr CD’s? What does this current yield curve tell you? DO NOT GIVE GOOGLE/WIKIPEDIA/INVESTOPEDIA DEFINITION OF THE YIELD CURVE. PLEASE DO INTERNET RESEARCH.
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#3. Johnson Motors’s bonds have 10 years remaining to maturity. Interest is paid annually, the bonds have a $1,000 par value, and the coupon rate is 8 percent. The bonds have a yieldto maturity of 9 percent. What is the current market price of these bonds?
#9. A bond you are evaluating has a 7.5 percent coupon rate (compunded semiannually), a $1,000 face value, and is 10 years from maturity.
a. If the required rate of return on the bond is 6 percent, what is its fair present value?
b. If the required rate of return on the bond is 8 percent, what is its fair present value?
c. What do your answers to parts (a) and (b) say about the relation between required rates of return and fair values of bonds?
#11. Calculate the fair present values of the following bonds, all of which pay interest semiannually, have a face value of $1,000, have 4 years remaining to maturity, and havea. required rate of return of 10 percent.
a. The bond has a 6 percent coupon rate.
b. The bond has a 8 percent coupon rate.
c. The bond has a 10 percent coupon rate.
d. What do your answers to parts (a) through (c) say about the relation between coupon rates and present values?
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