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- List and describe thefactors that affect theequilibrium interestrate in the bondmarketA semiannual payment bond with a $1,000 par has a 7 percent quoted coupon rate, a 7 percent promised YTM, and 10 years to maturity. What is the bond's duration? If interest rates are expected to rise by one half of a percent, by how much would you expect the price to change using the modified duration equation? How much would you expect the price to change using convexity? You need to use the bond duration and convexity calculator to answer this question.A6. Suppose the economy enters a recession. What prediction does the supply and demand model of bonds make for the equilibrium quantity of bonds traded? What prediction does the supply and demand models of bond make for the equilibrium price and yield to maturity of bonds? Explain with the aid of a supply and demand diagram
- You have been promoted to head of Treasury and Investment Management at Ecobank andhave been handed information on a number of issues for which immediate answers arerequired. For each excerpt from the issues presented below answer the associatedquestion(s):(i) Ecobank holds ¢500 million T-Bill but is in short of cash. It needs cash to meetthe requirement of a customer who has come to withdraw ¢400million.Youhave been asked to approach Barclays Bank to sell the T-Bill for ¢495 millionwith agreement to repurchase within 4 working days.(a) How much in cedis does Ecobank lose in this transaction(b) What is the Repo Rate on this transaction (ii) You have just been offered a commercial paper with a face value of ¢45,000,000which bears a discount of 36% and has 182 days to mature.(a) How much will you be prepared to pay for this paper? (b) What is the cedi discount on the paper? (iii) Ecobank plans to issue a 2-year bond with a face value of ¢500,000,000 bearing20% coupon rate. The market…1. What does the following yield curve tell us? Treasury yield curve for January 20, 2006. Maturity Yield (%) 1 month 3.95 3 months 4.35 6 months 4.48 1 year 4.44 2 years 4.37 3 years 4.32 5 years 4.31 7 years 4.32 10 years 4.37 20 years 4.59Q2. Consider a bond with a 4% annual coupon and a face value of $1,000. Years to Maturity Yield to Maturity Current Price 5% 4% 2% 1% 1 2 3 y 3 1. Check that w, x, y and z are greater than, equal to or smaller than $1,000. 2. Also, order w, x, y and z from the highest to the lowest. 3. Consider the bond "y" for the 3-year maturity bond. Provide an "EQUATION" to compute P+1, assuming that the market interest rate in the next year (period 1) is 10%.
- Briefly describe and explain the following investments terms; g) EAR h) Amortizing i) Bond valuationPlease help me solve this. Please show every so I can understand. Question: A quinceañera fund is established by making four (4) identical deposits: Upon the birth of a baby girl, Upon the girl's 1st birthday, Upon the girl's 2nd birthday, and Upon the girl's 3rd birthday. Suppose that the fund that pays 4% interest compounded annually, and that the full balance of 10,527 dollars is withdrawn upon the girl's 15th birthday. How much is the amount of each deposit? Round your answer to the nearest whole number. Do not use currency signs such as "$."Table 5.1 1 year 2 years З years 1.50% 2.25% 3.25% Table 5.1 shows the interest rates for Treasury securities of different maturities. Assume that the liquidity premium theory is correct. 103) Refer to Table 5.1 On this day, what did investors expect the interest rate to be on the one -year 103) Treasury bill in two years if the term premium on a two-year Treasury note is 0.25%? A) 1.875% B) 2.25% C) 2.375% D) 2.5% 104) Refer to Table 5.1 On this day, what did investors expect the interest rate to be on the one-year Treasury bill in two years if the term premium on a two-year Treasury note is 0.25% and the term premium on a three-year Treasury note is 0.75%? A) 2.375% 104) B) 3.25% C) 3.50% D) 4.75%
- According to the portfolio theroies of money deman , which of the following statement is true? an increase in the epected rate of inlfation increases the deman for money an increase in the real return of stock increases the demand of the money a decrease in wealth increase the deman for money a decrease in the real return on bonds increases the demand for moneySuppose initially that two assets, A and B, will each make a single guaranteed payment of $400 in 1 year. But asset A has a current price of $280 while asset B has a current price of $320. Instructions: Round your answers to 2 decimal places. a. What are the rates of return of assets A and B at their current prices? Return on assetA =| ]percent Return on asset B= percent Given these rates of return, which asset should investors buy and which asset should they sell? Buy asset (Click to solect) and sell asset (Click to select) b. Assume that arbitrage continues until A and B have the same expected rate of return. When arbitrage ends, will A and B have the same price? (Click to select) Next, consider another pair of assets, C and D. Asset C will make a single payment of $600 in 1 year, while D will make a single payment of $800 in 1 year. Assume that the current price of C is $440 and that the current price of D is $680. c. What are the rates of return of assets C and D at their current…ABC Co. can borrow at either an 8.5% fixed rate or a floating rate of prime + 1.75%. Salmon Inc. can borrow at either a floating rate of prime + 1.25% or a fixed rate of 8.65%. ABC Co. prefers a floating rate and Salmon Inc. prefers a fixed rate. Which one of the following terms would be acceptable to both ABC Co. and Salmon Inc if they opted to enter an interest rate swap? A. 8.6% fixed for prime + 1.2% floating B. 8.5% fixed for prime + 1.75% floating C 8.65% fixed for prime + 1.3% floating D. 8.65% fixed for prime + 1.25% floating E. 8.6% fixed for prime + 1.3% floating Please show your work, Thanks!