# Fin 7000 problem set 2 37557

Question

#### How many pages is this assigment?

Problem 1: Fill in the table below for each of the following interest rates:

Compounding PV of \$1000

Case Stated Annual Rate Periods Per Year Effective Annual Rate at t = 2

1 .12 1

2 .12 2

3 .12 4

4 .12 12

5 .12 24

6 .12 infinity

Problem 2:

The effective annual rate is 3% (i.e., re = .03). What is the stated rate for compounding semi-annually that is associated with this effective rate?That is, solve for rs such that 1+re = (1+(rs/2))2 given re = .03.

Problem 3:

Consider the following information on a yield curve (where t = 0 is now)

Time (in years) to Maturity (TTM) Effective Annual Rate

1. .01

2. .015

3. .02

4. .0225

5. .0235

Part 1: Using this yield curve, calculate the present value of the following payment streams:

1. \$100 at t = 1,

2. \$100 at t = 2,

3. \$100 at t = 3,

4. \$100 at t = 4,

5. \$100 at t = 5,

6. \$100 at t = 1 and \$100 at t = 4

7. \$200 at t = 2 and \$200 at t = 5

Part 2: Also using the above yield curve, calculate the forward rate for the one-year yield next year at t = 1. If you take your answer to b above divided by your answer to a above and then subtract 1, do you get the same answer?

Part 3: Consider the following two strategies for getting a return over three years:

Strategy 1: Invest for three years at the three year rate;

Strategy 2: invest at the two-year rate for two years and then roll over into the one-year rate in two years.

You can calculate a forward rate for the one-year rate in two years (at t = 2) by considering the one-year rate in two years that would make you indifferent between Strategy 1 and Strategy 2. What is that forward rate?

## Calculate the price of your order

550 words
We'll send you the first draft for approval by September 11, 2018 at 10:52 AM
Total price:
\$26
The price is based on these factors:
Number of pages
Urgency
Basic features
• Free title page and bibliography
• Unlimited revisions
• Plagiarism-free guarantee
• Money-back guarantee
On-demand options
• Writer’s samples
• Part-by-part delivery
• Overnight delivery
• Copies of used sources
Paper format
• 275 words per page
• 12 pt Arial/Times New Roman
• Double line spacing
• Any citation style (APA, MLA, Chicago/Turabian, Harvard)

# Our guarantees

Delivering a high-quality product at a reasonable price is not enough anymore.
That’s why we have developed 5 beneficial guarantees that will make your experience with our service enjoyable, easy, and safe.

### Money-back guarantee

You have to be 100% sure of the quality of your product to give a money-back guarantee. This describes us perfectly. Make sure that this guarantee is totally transparent.

### Zero-plagiarism guarantee

Each paper is composed from scratch, according to your instructions. It is then checked by our plagiarism-detection software. There is no gap where plagiarism could squeeze in.

### Free-revision policy

Thanks to our free revisions, there is no way for you to be unsatisfied. We will work on your paper until you are completely happy with the result.