A commercial bank made a five-year term loan at 13 percent. The bank's economics department forecasts that
Question:
A commercial bank made a five-year term loan at 13 percent. The bank's economics department forecasts that one and three years in the future, the two-year interest rate will be 12 percent and 14 percent, respectively. The current one-year rate is 7 percent. Given that the bank's forecast is reliable, has the bank set the five-year rate correctly?
Fantastic news! We've Found the answer you've been seeking!
Step by Step Answer:
Answer rating: 41% (12 reviews)
Given the banks forecast the fiveyear rate t ...View the full answer
Answered By
JAPHETH KOGEI
Hi there. I'm here to assist you to score the highest marks on your assignments and homework. My areas of specialisation are:
Auditing, Financial Accounting, Macroeconomics, Monetary-economics, Business-administration, Advanced-accounting, Corporate Finance, Professional-accounting-ethics, Corporate governance, Financial-risk-analysis, Financial-budgeting, Corporate-social-responsibility, Statistics, Business management, logic, Critical thinking,
So, I look forward to helping you solve your academic problem.
I enjoy teaching and tutoring university and high school students. During my free time, I also read books on motivation, leadership, comedy, emotional intelligence, critical thinking, nature, human nature, innovation, persuasion, performance, negotiations, goals, power, time management, wealth, debates, sales, and finance. Additionally, I am a panellist on an FM radio program on Sunday mornings where we discuss current affairs.
I travel three times a year either to the USA, Europe and around Africa.
As a university student in the USA, I enjoyed interacting with people from different cultures and ethnic groups. Together with friends, we travelled widely in the USA and in Europe (UK, France, Denmark, Germany, Turkey, etc).
So, I look forward to tutoring you. I believe that it will be exciting to meet them.
3.00+
2+ Reviews
10+ Question Solved
Related Book For
Financial Institutions, Markets and Money
ISBN: 978-1119330363
12th edition
Authors: David S. Kidwell, David W. Blackwell, David A. Whidbee, Richard W. Sias
Question Posted:
Students also viewed these Business questions
-
Renaud Development Corporation (RDC) is a real estate development company that is 60% owned by Bertrand Renaud. RDC has three shareholders: (1) Bertrand Renaud, a major figure in real property...
-
Cartco needs to borrow $5 million for an upgrade to its headquarters and manufacturing facility. Management has decided to borrow using a five-year term loan from its existing commercial bank. The...
-
Dinero Bank offers you a $60,000, five-year term loan at 7.5 percent annual interest. What will your annual loan payment be?
-
The figure shows a coil with a sheet iron core with unlimited magnetic penetration and a rectangular cross-section. The coil is made of insulated copper wire with specific resistance p. Coil...
-
Businesses valued at less than $50 million or so rarely go public. Explain the limitations to such businesses if they did go public.
-
A series of blades, such as in Example 10.13, moving in the same direction as a water jet of \(25 \mathrm{~mm}\) diameter and of velocity \(46 \mathrm{~m} / \mathrm{s}\), deflects the jet...
-
Which correctly represents the flow of information from one financial statement to another? a. Income statement to the statement of retained earnings b. Statement of retained earnings to the balance...
-
A low-carbon-steel machine part, operating in a corrosive atmosphere, lasts 6 years, and costs $350 installed. If the part is treated for corrosion resistance it will cost $500 installed. How long...
-
Suppose that Boeing Corporation exported a Boeing 747 to Lufthansa and billed 20 million payable in one year. One-year interest rates are 2% in the United States and 4% in the euro zone. The spot...
-
The chart shows the number of global corporate bond issues for which Standard & Poor's issued ratings upgrades or downgrades every year from 1981 to 2014. a. What is the trend in the number of...
-
Summarize the expectation theory and the preferred-habitat theory of the term structure of interest rates. Are these theories in any way related or are they alternative explanations of the term...
-
Define default risk. How does the default risk premium vary over the business cycle? Explain your answer.
-
A golf ball hit from a tee accelerates from rest to a speed of \(40.0 \mathrm{~m} / \mathrm{s}\) relative to the Earth reference frame. By what percent does the mass of the ball increase as it is hit?
-
Jack Contractors obtained a $150,000 loan for a new project. It is a 4 year loan with a 6% annual interest rate. How much will Jack pay at the end of year 4?
-
Analyzing Data In June, Snead's Snack Bar sold 1,000 fruit smoothies for $3.50 each. In July, they sold 1,300 fruit smoothies at a price of$2.00. Is the demand for fruit smoothies elastic or...
-
Tom and Mary are each age 36 and have three children, ages 4, 6, and 9. They are concerned about funding education. Also they are concerned about private high school education since the town they...
-
What if you were the chair of your state judicial reform commission, which was charged with the task of reforming the role and power of prosecutors in your state; what would be some of your...
-
Suppose the government increases the sales tax, affecting restaurants, hotels, and other products purchased by tourists. Explain the impact on tourists, local consumers, and local businesses.
-
Prove the statement using the , definition of a limit. lim x' = 8
-
Which of the following is NOT a magnetic dipole when viewed from far away? a) A permanent bar magnet. b) Several circular loops of wire closely stacked together with the same current running in each...
-
Using the Federal Reserve Bulletin, the Federal Reserve Bank of St. Louis website (FRED), or the Wall Street Journal, plot the yield curve for U.S. Treasury securities on a quarterly basis for this...
-
A commercial bank made a five-year term loan at 13 percent. The bank's economics department forecasts that one and three years in the future, the two-year interest rate will be 12 percent and 14...
-
What do bond ratings measure? Explain some of the important factors in determining a security's bond rating.
-
Proposals to increase inheritance taxes are also under discussion. These are taxes on the amount of money that a person (an heir) inherits. What would the likely effect on the labor supply of heirs...
-
In 2011, a new program was put in place that allowed Christmas trees to be taxed (initially $1 per tree), with funds going to the Christmas Tree Promotion Board. The CTPB would use the funds to...
-
W W2 W3 W4 f f f f Consider the following two-sided matching problem. ff2 f3 f Wi W3 WA f2 fa fa fa fa fa f2 fi fa f2 fi f2 102 W3 WA W2 W3 W2 W2 Wi Wa Wa Wi W3 Compute the W-DA outcome. Compute the...
Study smarter with the SolutionInn App