Use the following chart on US Treasury Bond Rates to answer questions 9 and 10. All...

  

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Use the following chart on US Treasury Bond Rates to answer questions 9 and 10. All bonds are zero coupon bonds. Maturity 3 Month 6 Month 2 Year 3 Year 5 Year 10 Year 30 Year Yield 0.77 0.92 1.23 1.42 1.79 2.26 2.95 US Treasury Bonds Rates Yesterday 0.76 0.92 Cost per house 1.25 S values Price Boardwalk/Mayfair 400 200 1.44 1.82 23 2.98 Last Week 0.75 0.92 Rent 1 house 1.25 Rent so 200 1.46 Rent 2 houses 600 1.84 2.31 2.97 9. A bank has all its assets in one hundred 30-year bonds that are currently priced to yield 2.95%. The bank also has deposits of $50,000 and Reserves of $14196.81. The central bank has decided to raise interest rates in response to high inflation and so the 30-year bond yield is going to increase along the yield curve. At what yield on 30-year bonds will the bank have a net worth of zero and be insolvent? Last Month 0.66 10. Suppose you decide to purchase a 10-year bond, wait 3-years, and sell it. What is your expected 3-year holding period return? Use expectations theory for your forecast. 0.73 1.21 11. Suppose you just purchased a stock for $45.56 and collected its current dividend of $2.30. If the stock is expected to grow forever at a constant rate of 3.0% and the required return is 8.2%, what would you expect to sell the stock for in 5 years? 1.47 12. Consider the game of Monopoly and the property Boardwalk/Mayfair. Information on price, rents, mortgage values is given below. At a price of $400, is Boardwalk under or over-valued? Begin the discussion using 2 or 3 concepts on asset prices. Rent 3 houses 1400 1.89 Rent 4 houses hotel 1700 2.37 2.99 Rent Mortgage value 2000 200 Use the following chart on US Treasury Bond Rates to answer questions 9 and 10. All bonds are zero coupon bonds. Maturity 3 Month 6 Month 2 Year 3 Year 5 Year 10 Year 30 Year Yield 0.77 0.92 1.23 1.42 1.79 2.26 2.95 US Treasury Bonds Rates Yesterday 0.76 0.92 Cost per house 1.25 S values Price Boardwalk/Mayfair 400 200 1.44 1.82 23 2.98 Last Week 0.75 0.92 Rent 1 house 1.25 Rent so 200 1.46 Rent 2 houses 600 1.84 2.31 2.97 9. A bank has all its assets in one hundred 30-year bonds that are currently priced to yield 2.95%. The bank also has deposits of $50,000 and Reserves of $14196.81. The central bank has decided to raise interest rates in response to high inflation and so the 30-year bond yield is going to increase along the yield curve. At what yield on 30-year bonds will the bank have a net worth of zero and be insolvent? Last Month 0.66 10. Suppose you decide to purchase a 10-year bond, wait 3-years, and sell it. What is your expected 3-year holding period return? Use expectations theory for your forecast. 0.73 1.21 11. Suppose you just purchased a stock for $45.56 and collected its current dividend of $2.30. If the stock is expected to grow forever at a constant rate of 3.0% and the required return is 8.2%, what would you expect to sell the stock for in 5 years? 1.47 12. Consider the game of Monopoly and the property Boardwalk/Mayfair. Information on price, rents, mortgage values is given below. At a price of $400, is Boardwalk under or over-valued? Begin the discussion using 2 or 3 concepts on asset prices. Rent 3 houses 1400 1.89 Rent 4 houses hotel 1700 2.37 2.99 Rent Mortgage value 2000 200