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ARE143_CHAP_9

# ARE143_CHAP_9 - 1 Managerial Economics(ARE 143 University...

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1 Managerial Economics (ARE) 143 University of California, Davis Instructor: John H. Constantine Chapter 9—Interest Rates Problem 1 : What is the price of a Treasury STRIPS with a face value of \$100 that matures in seven years and has a yield to maturity of 5.6 percent? Problem 2 : What is the price of a Treasury STRIPS with a par value of \$100,000 that matures in seven years and has a yield to maturity of 6.9 percent? What is the quoted price? Problem 3 : (a) What is the price of a U.S. Treasury bill with 84 days to maturity quoted at a discount yields of 4.70 percent. Assume a \$1 million dollar face value. (b) What is the bond-equivalent yield? Problem 4 : U.S. Treasury STRIPS, close of business February 15, 2006: Maturity Price Maturity Price Feb07 95:21 Feb10 81:10 Feb08 90:27 Feb11 76:05 Feb09 85:24 Feb12 71:18 (a) Calculate the quoted yield for each of the STRIPS given in the table above. Does the market expect interest rates to go up or down in the future? (b)

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ARE143_CHAP_9 - 1 Managerial Economics(ARE 143 University...

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