$\begin{array}{cc} \text { Year } & \text { 1 Year Forward Rate } \\ 1 & 4.5\% \\ 2 & 5.2\% \\ 3 & 5.9\% \\ 4 & 6.3\% \\ 5 & 6.8 \% \\ 6 & 7.0\% \end{array}$ . What would the yield to maturity be on a four-year zero-coupon bond purchased today?

A) 7.80% B) 6.30% C) 5.47% D) 4.25% E) None of the options are correct. A) 7.80% B) 6.30% C) 5.47% D) 4.25% E) None of the options are correct.

Suppose that all investors expect that interest rates for the 4 years will be as follows: $\begin{array}{lc} \text { Year } & \text { Forward Interest Rate } \\ 0 & \text { (today) } 3\% \\ 1 & 4\% \\ 2 & 5\% \\ 3 & 6\% \end{array}$ What is the price of 3-year zero-coupon bond with a par value of $1,000?

A) $889.08 B) $816.58 C) $772.18 D) $765.55 E) None of the options are correct. A) $889.08 B) $816.58 C) $772.18 D) $765.55 E) None of the options are correct.

Suppose that all investors expect that interest rates for the 4 years will be as follows: $\begin{array}{lc} \text { Year } & \text { Forward Interest Rate } \\ 0 & \text { (today) } 3\% \\ 1 & 4\% \\ 2 & 5\% \\ 3 & 6\% \end{array}$ If you have just purchased a 4-year zero-coupon bond, what would be the expected rate of return on your investment in the first year if the implied forward rates stay the same? (Par value of the bond = $1,000.)

A) 5% B) 3% C) 9% D) 10% E) None of the options are correct. A) 5% B) 3% C) 9% D) 10% E) None of the options are correct.

$\begin{array}{cc} \text { Year } & \text { 1-Year Forward Rate } \\ 1 & 5\% \\ 2 & 5.5\% \\ 3 & 6.0\% \\ 4 & 6.5\% \\ 5 & 7.0\% \end{array}$ Calculate the price at the beginning of year 1 of an 8% annual coupon bond with face value $1,000 and 5 years to maturity.

A) $1,105.47 B) $1,131.91 C) $1,084.35 D) $1,150.01 E) $719.75 A) $1,105.47 B) $1,131.91 C) $1,084.35 D) $1,150.01 E) $719.75

$\begin{array}{cc} \text { Year } & \text { 1-Year Forward Rate } \\ 1 & 4.6\% \\ 2 &4.9\% \\ 3 & 5.2\% \\ 4 & 5.5\% \\ 5 &6.8\% \end{array}$ What is the yield to maturity of a 1-year bond?

A) 4.6% B) 4.9% C) 5.2% D) 5.5% E) 5.8% A) 4.6% B) 4.9% C) 5.2% D) 5.5% E) 5.8%

Exam 15: The Term Structure of Interest Rates

Year 1 Year Forward Rate 1 4.5\% 2 5.2\% 3 5.9\% 4 6.3\% 5 6.8\% 6 7.0\% . What would the yield to maturity be on a four-year zero-coupon bond purchased today?

(Multiple Choice)

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Question 61

Suppose that all investors expect that interest rates for the 4 years will be as follows: Year Forward Interest Rate 0 (today) 3\% 1 4\% 2 5\% 3 6\% What is the price of 3-year zero-coupon bond with a par value of $1,000?

(Multiple Choice)

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Question 62

Suppose that all investors expect that interest rates for the 4 years will be as follows: Year Forward Interest Rate 0 (today) 3\% 1 4\% 2 5\% 3 6\% If you have just purchased a 4-year zero-coupon bond, what would be the expected rate of return on your investment in the first year if the implied forward rates stay the same? (Par value of the bond = $1,000.)

(Multiple Choice)

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Question 63

Year 1-Year Forward Rate 1 5\% 2 5.5\% 3 6.0\% 4 6.5\% 5 7.0\% Calculate the price at the beginning of year 1 of an 8% annual coupon bond with face value $1,000 and 5 years to maturity.

(Multiple Choice)

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Question 64

An inverted yield curve implies that

(Multiple Choice)

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Question 65

Year 1-Year Forward Rate 1 4.6\% 2 4.9\% 3 5.2\% 4 5.5\% 5 6.8\% What is the yield to maturity of a 1-year bond?

(Multiple Choice)

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Question 66

Year 1 Year Forward Rate 1 4.5\% 2 5.2\% 3 5.9\% 4 6.3\% 5 6.8\% 6 7.0\% . What would the yield to maturity be on a four-year zero-coupon bond purchased today?

Suppose that all investors expect that interest rates for the 4 years will be as follows: Year Forward Interest Rate 0 (today) 3\% 1 4\% 2 5\% 3 6\% What is the price of 3-year zero-coupon bond with a par value of $1,000?

Year 1-Year Forward Rate 1 5\% 2 5.5\% 3 6.0\% 4 6.5\% 5 7.0\% Calculate the price at the beginning of year 1 of an 8% annual coupon bond with face value $1,000 and 5 years to maturity.

An inverted yield curve implies that

Year 1-Year Forward Rate 1 4.6\% 2 4.9\% 3 5.2\% 4 5.5\% 5 6.8\% What is the yield to maturity of a 1-year bond?

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