You’re looking at some corporate bonds issued by Ford, and you are trying to determine what the nominal interest rate should be on them. You have determined that the real risk- free interest rate is 3.0%, and this rate is expected to continue on into the future without any change. In addition, inflation is expected to be constant over the future at a rate of 3.0%. The default- risk premium is also expected to remain constant at a rate of 1.5%, and the liquidity- risk premium is very small for Ford bonds, only about 0.02%. The maturity- risk premium is dependent upon how many years the bond has to maturity. The maturity- risk premiums are as follows:
Given this information, what should the nominal rate of interest on Ford bonds maturing in 0– 1 year, 1– 2 years, 2– 3 years, and 3– 4 years be?
Answer to relevant QuestionsYou want to invest your savings of $ 20,000 in government securities for the next 2 years. Currently, you can invest either in a security that pays interest of 8 percent per year for the next 2 years or in a security that ...You are considering investing money in Treasury bills and wondering what the real risk- free rate of interest is. Currently, Treasury bills are yielding 4.5% and the future inflation rate is expected to be 2.1% per year. ...Why is it that the preferred stockholders’ equity section of the balance sheet changes only when new shares are sold or repurchased, whereas the common stockholders’ equity section changes from year to year regardless of ...Given the information on page 90 for Pamplin Inc.: a. How much is the firm’s net working capital and what is the debt ratio? b. Complete a common- sized income statement, a common- sized balance sheet, and a statement of ...Interpret the following information regarding Westlake Corporation’s cash flows. Sales.................. $ 550,000 Accumulated depreciation........ 190,000 Cash ? Cost of goods sold........ 320,000 Accounts ...
Post your question