{[ promptMessage ]}

Bookmark it

{[ promptMessage ]}

CHE374-2010F-PS03

# CHE374-2010F-PS03 - CHE374F-2010 Problem Set#3 1 You are...

This preview shows pages 1–2. Sign up to view the full content.

Page 1 of 2 CHE374F-2010 Problem Set #3 1. You are given the following T-bill maturity rates and prices. Calculate the yield rates (effective annual and continuously compounding annual) for each T-bill. Plot both yield curves. Maturity (Months) T-Bill Price 3 99.5 6 99.1 9 98.85 11 98.1 What would be the effective annual and continuously compounding annual “risk - free” rates for an investment maturing in 7 months? You know that you will have to invest at the risk-free rate 6 months from now for a term of 5 months (i.e. you will be investing from months 6 to 11). Based on the market conditions as given in the table, can you think of a way of determining the market’s expectation of what the 5 month risk-free rate would be 6 months from now? 2. You are given the following price data for T-bills. Maturity (Months) T-Bill Price 2 99.4 6 98.9 8 97.85 11 97.3 Assume the risk-free rate for the first two months is flat (i.e. the two month rate is equivalent to the one month rate). Estimate the price of a T-bill maturing in: a) One month b) five and half months

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

### Page1 / 2

CHE374-2010F-PS03 - CHE374F-2010 Problem Set#3 1 You are...

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document
Ask a homework question - tutors are online