The WSJ reports that the YTM of 1-, 2-, and 3-year default-free zero-coupon bonds are 7%, 7.5%,
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Question:
The WSJ reports that the YTM of 1-, 2-, and 3-year default-free zero-coupon bonds are 7%, 7.5%, and 8.2%, respectively. Based on the expectations theory, what should be the implied 1-year forward rate, one year from today?
| A. | 8.12% | |
| B. | 7.91% | |
| C. | 7.79% | |
| D. | 8.00% |
You are considering a corporate bond that pays interest semi-annually, has a par value of $1,000, matures in 8 years, and has a YTM of 6%. If the bond's coupon rate is 7%, what is the current yield of the bond?
A. 3.29%
B. 3.18%
C. 6.59%
D. 6.47%
The WSJ reports that the rates on 4- and 5-year Treasuries are 5.84% and 5.78%, respectively. Based on the expectations theory, what is the expected 1-year Treasury spot rate in year 5?
| A. | 5.68% | |
| B. | 6.08% | |
| C. | 5.81% | |
| D. | 5.54% |
Expert Answer:
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