Suppose that $10,000 of a 6-year fixed-principal Treasury note with a coupon rate of 6.5% is purchased by a dealer firm to create zero-coupon Treasury securities. How many zero-coupon Treasury securities can be created?
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Suppose that $10,000 of a 6-year fixed-principal Treasury note with a coupon rate of 6.5% is purchased by a dealer firm to create zero-coupon Treasury securities.
How many zero-coupon Treasury securities can be created?
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- Suppose you purchase a T-bills that is 125 days from maturity for $9,765. The T-bills has a face value of $10,000.a. Calculate the T-bills’s quoted discount rate. b. Calculate the T-bills’s annualized rate.c. Who are the major issuers of and investors in money market securities?Suppose that $10,000 of a 6-year fixed-principal Treasury note with a coupon rate of 6.5% is purchased by a dealer firm to create zero-coupon Treasury securities. Let’s assume the appropriate annual yield is 8%. What should be the current value of the zero-coupon Treasury security created from the fifth coupon payment?Suppose that ABC bank decides to purchase a T-note and convert it into a STRIP. The T-note has a maturity of 6 years, pays a 6% coupon rate (semiannual) and a face value of $10,000. How many separate securities can be created? O 6 O 12 O 13
- An insurance company must make payments to a customer of $10 million in one year and $4 million in five years. The yield curve is flat at 10%.a. If it wants to fully fund and immunize its obligation to this customer with a single issue of a zero-coupon bond, what maturity bond must it purchase?b. What must be the face value and market value of that zero-coupon bond?Suppose tnat ABC bank decides to purchase a T-note and convert it into a STRIP. The T-note has a maturity of 6 years, pays a 6% coupon rate (semiannual) and a face value of $10,000. How many separate securities can be created? O 6O7O 12O13An insurance company must make payments to a customer of $10 million in one year and $5 million in five years. The yield curve is flat at 10%. Required: a. If it wants to fully fund and immunize its obligation to this customer with a single issue of a zero-coupon bond, what maturity bond must it purchase? Note: Do not round intermediate calculations. Round your answer to 2 decimal places. b. What must be the face value and market value of that zero-coupon bond? Note: Do not round intermediate calculations. Enter your answers in millions rounded to 2 decimal places. a. Maturity of zero coupon bond b. Face value b. Market value years million million
- An insurance company must make payments to a customer of $9 million in one year and $6 million in six years. The yield curve is flat at 7%. Required: a. If it wants to fully fund and immunize its obligation to this customer with a single issue of a zero-coupon bond, what maturity bond must it purchase? Note: Do not round intermediate calculations. Round your answer to 2 decimal places. b. What must be the face value and market value of that zero-coupon bond? Note: Do not round intermediate calculations. Enter your answers in millions rounded to 2 decimal places. Answer is complete but not entirely correct. 12,410,000.00 years x million x million a. Maturity of zero coupon bond b. Face value b. Market value $ 14,810,000.00 12,410,000.00 $ 4The promised cash flows of three securities are listed below. If the cash flows are risk-free, and the risk-free interest rate is 6.0%, determine the no-arbitrage price of each security before the first cash flow is paid. (Click on the following icon in order to copy its contents into a spreadsheet.) Security A B C Cash Flow Today ($) 500 0 1,000 Cash Flow in One Year ($) 500 1,000 0 ... The no-arbitrage price of security A is $971.7. (Round to the nearest cent.) The no-arbitrage price of security B is $ (Round to the nearest cent.)Suppose that yield rates on zero coupon bonds are currently 26 for a one-year maturity, 3% for a two-year maturity and 4.% for a three-year maturity (all effective annual rates). Suppose that someone is willing to borrow money from you starting one year from now to be repaid three years from now at an effective annual interest rate of 6.5146438635186%. Construct a transaction in which an arbitrage gain can be obtained. What is your positive net gain for net investment of 0? (net cashflow at t-3) 01345 One possible correct answer is: 0.030250290387703
- The risk-free rate on long-term Treasury bonds is 6.04%. Assume thatthe market risk premium is 5%. What is the required return on the market? Now use the SML equation to calculate the two companies’ requiredreturns.Assume the zero-coupon yields on default-free securities are as summarized in the following table: in order to copy its contents into a spreadsheet.) Maturity (years) 1 2 3 4 5 Zero-coupon YTM 6.00% 6.40% 6.70% 7.10% 7.40% What is the price of a five-year, zero-coupon, default-free security with a face value of $1,000? (Click on the following iconAn insurance company must make payments to a customer of $10 million in one year and $4 million in five years. The yield curve is flat at 10%. a. If it wants to fully fund and immunize its obligation to this customer with a single issue of a zero-coupon bond, what maturity bond must it purchase? (Do not round intermediate calculations. Round your answer to 4 decimal places.) Maturity of zero coupon bond b. What must be the face value and market value of that zero-coupon bond? (Do not round intermediate calculations. Enter your answers in millions rounded to 2 decimal places.) Face value Market value years million million