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- Posted on Apr 18, 2009 at 10:59:39PM
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Preview: ... volve securities with maturities greater than one year.<br><br> <br><br> <br><br>3. <br> If the stock market is semistrong-form efficient, which of the following statements would be CORRECT?<br>(Points: 6)<br><br> <br>A trading strategy in which you buy stocks that have recently fallen in price is likely to provide you with a return that exceeds the return on the overall stock market.<br><br> <br>(Points: 6)<br> <br> <br>2.30%<br><br><br><br>5. <br>Suppose the real risk-free rate is 3.50%, the average future inflation rate is 2.25%, and a maturity premium of 0.10% per year t ...
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$16.00 Finance Answers
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- Posted on Apr 18, 2009 at 11:19:20PM
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Preview: ... markets for (Points: 4)<br> Foreign currencies. <br> Consumer automobile ...
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$20.00 Finance - Correct Answers to 9 Questions with Explanations for Numerical Answers (Correct Answers Marked in Blue)
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- Posted on Apr 19, 2009 at 04:19:18PM
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Preview: ... .90%<br><br> <br>2.00%<br><br> <br>2.10%<br><br>2.20% <br> <br>2.30%<br><br>Answer: 1.90%<br><br>Explanation:<br>Yield on T- bills = Risk free rate + Inflation rate<br>5.00% = Risk free rate + 3.10%<br>Risk free rate = 5.00% - 3.10%<br> = 1.90%<br><br>5. Suppose the real risk-free rate is 3.50%, the average future inflation rate is 2.25%, and a maturity premium of 0.10% per year to maturity applies, i.e., MRP = 0.10%(t), where t is the years to maturity. What rate of return would you expect on a 5-year Treasury security, assuming the pure expectations theory is NOT valid? Disregard cross-product terms, i.e., if averaging is required, use the arithmetic average.<br>(Points: 6)<br> <br>5.95%<br><br>6.05%<br> <br>6.15%<br> <br>6.25%<br> <br>6.35%<br><br>Answer: 6.25%<br><br>Explanation:<br><br>Rate of return on a 5-year treasury security = 3.5+ 2.25+ (5x.1)<br> =6.25 %<br><br><br>6. Which of the following would be most likely to lead to a higher level of interest rates in the economy?<br>(Points: 6)<br> <br>Households start saving a larger percentage of their income.<br><br>Corporations step up their expansion plans and thus increase their demand for capital.<br> <br>The level of inflation begins to decline.<br> ...
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$20.00 Unit4_finance
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- Posted on Apr 19, 2009 at 10:36:11PM
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Preview: ... rity = 3.50% + 2.25% + 0.10 (5)<br>= 6.25%<br><br>6. <br>Which of the following would be most likely to lead to a higher level of interest rates in the economy?<br>(Points: 6)<br> Households start saving a larger percentage of their income.<br> Corporations step up their expansion plans and thus increase their demand for capital.<br> The level of inflation begins to decline.<br> The economy moves from a boom to a recession.<br> The Federal Reserve decides to try to stimulate the economy.<br><br>7. <br>Assume that interest rates on 20-year Treasury and corporate bonds are as follows:<br>T-bond = 7.72% A = 9.64%<br>AAA = 8.72% BBB = 10.18%<br>The differences in rates among these issues were caused primarily by<br>(Points: 6)<br> Tax effects.<br> Default risk differences.<br> Maturity risk differences.<br> Inflation differences.<br> Real risk-free rate differences<br><br>8. What does it mean when it is said the U.S. is running a trade deficit? What impact do you think a trade deficit could have on interest rates? Scroll down to respond. <br>A trade deficit means that the difference in the value of exports and imports is not balanced. It means that US is importing more than what they are exporting. <br> <br>Some would argue that the trade deficit may produce short term declines in interest rates as we try to make goods more affordable overseas. BUT actually, because of the declining value of the dollar and the trade deficit behind hard goods ...
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