1) If the current interest rate on 1 year T-notes is 0.194% and the projected inflation...

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1) If the current interest rate on 1 year T-notes is 0.194% and the projected inflation rate is 1.6%, what is the anticipated Real Interest Rate? 2) If the current interest rate on the 2 year Treasury Note is 0.28% and the rate on the 3 year T-Note is 0.36%, what is the implied 1 year rate going to be two years from now? 3) Currently 5 year T-notes provide a yield to maturity of 1.74% per year. At the same time, TIPS (Treasury Inflation Protected Securities) with a 5 year maturity provide a yield (before inflation) of -0.50% per year. What is the implied annual inflation rate over the next 5 years? 4) You will be receiving payment of NP 1 million from a client in Mexico one year from now. The current spot rate for the Peso is 1 NP = US$ 0.077. The current price of Peso forward is 1NP = US$ 0.075. Your expectation of the peso spot rate one year from now is: Possible Outcome for Future Spot Rate 0.08 0.075 .07 60% 35% The question is whether you should buy the Peso forward, to lock in the existing rate, or wait until the funds are received and then exchange them for dollars. Probability 5% a) What would be your gain or loss from selling Pesos in the forward market under each of the 3 scenarios? Future Spot Rate 0.08 0.075 .07 Gain in US$ From Using Forwards Per Peso b) Weighted average profit/loss taking into account the probabilities = 1) If the current interest rate on 1 year T-notes is 0.194% and the projected inflation rate is 1.6%, what is the anticipated Real Interest Rate? 2) If the current interest rate on the 2 year Treasury Note is 0.28% and the rate on the 3 year T-Note is 0.36%, what is the implied 1 year rate going to be two years from now? 3) Currently 5 year T-notes provide a yield to maturity of 1.74% per year. At the same time, TIPS (Treasury Inflation Protected Securities) with a 5 year maturity provide a yield (before inflation) of -0.50% per year. What is the implied annual inflation rate over the next 5 years? 4) You will be receiving payment of NP 1 million from a client in Mexico one year from now. The current spot rate for the Peso is 1 NP = US$ 0.077. The current price of Peso forward is 1NP = US$ 0.075. Your expectation of the peso spot rate one year from now is: Possible Outcome for Future Spot Rate 0.08 0.075 .07 60% 35% The question is whether you should buy the Peso forward, to lock in the existing rate, or wait until the funds are received and then exchange them for dollars. Probability 5% a) What would be your gain or loss from selling Pesos in the forward market under each of the 3 scenarios? Future Spot Rate 0.08 0.075 .07 Gain in US$ From Using Forwards Per Peso b) Weighted average profit/loss taking into account the probabilities =

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Id be glad to assist you with these financial calculations and provide insights 1 Real Interest Rate Nominal interest rate 0194 Projected inflation ra... View the full answer