2011 HW 4 Fall

2011 HW 4 Fall - Treasury Bond 0.21875 1.3621875 136218.75...

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Seongjae Lee Money, Banking and Financial Markets Problem set #4 Due: October 5, 2011 1 What is the total return (in $$) on a $1,000 face value bond with a coupon rate of 5% that was purchased for $900 and sold one year later for $975? $125.00 2 If the nominal interest rate is 5%, the tax rate is 30% and the expected inflation rate is 2%, what is the real after-tax return? in % = 1.50% 3 Given the following information as reported in the Wall Street Journal Coupon Rate Maturity Bid Asked Chg Ask Yld. 7.875 Feb 21 136:07 136:10 23 a) Will the asked yield be higher or lower than the coupon rate? lower b) At what price could you sell $100,000 of face value of this
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Unformatted text preview: Treasury Bond? 0.21875 1.3621875 136218.75 4 Days to Asked Maturity Maturity Bid Asked Yield Aug 31 2011 270 1.75 1.72 a) What is the $ purchase price for $100,000 in face value for this Treasury Bill? 98710.00 b) What is the asked yield? 1.767% 5 In the spring of 2007, the Federal Funds rate was 5.25%. It is the overnight lending rate which banks charge each other for over night loans. Find the daily compound rate of interest and the interest payment, in dollars, on an overnight loan of $1 million at an interest rate of 5.25%. Daily Compound Rate of Interest : 0.014% Interest Payment : 140.20...
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