Please answer Question #39 and show work. A Treasury bill matures in 68 days and

Question

Please answer Question #39 and show work.

A Treasury bill matures in 68 days and has a bond equivalent yield of 4.05 percent. What is the effective annual rate? A. 4.12 percent B. 4.14 percent C. 4.15 percent D. 4.17 percent E. 4.18 percent 39. A $20,000 face value STRIPS is currently quoted at 38.642 and has 8 years to maturity. What is the yield-to-maturity? A. 6.26 percent B. 6.30 percent C. 12.25 percent D. 12.65 percent E. 12.83 percent 40 What is the one year interest rate one year from now if the current one-year interest rate is 2.55 percent and the two-year interest rate is 3.15 percent? Assume the rates are effective annual rates. A. 3.62 percent B. 3.67 percent

Explanation / Answer

38.

Effective annual rate = (1 + 0.0405/(365/73))^365/73 - 1

= ( 1 +0.0405/5) ^5 - 1

= 1.0081 ^5 - 1

= 4.12 %

39. Yield to maturity ( YTM)

38.642 = 20,000 *( 1 -8 * YTM )

38.642 = 20000 - 160,000 YTM

- 19961.35 = - 160,000 YTM

YTM = 12.65

40. ( 1+0.0315)^2 = (1+0.0255)(1+f1)

1.064 = 1.0255 ( 1+ f1)

1.064 = 1.0255 + 1.0255 f1

0.0385 = 1.0255 f1

F1 = 3.75%

Related Questions

Navigate

• Browse (All)
• Browse P
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.