Wilson wonder's bonds have 12 years remaining

Finance

Problem

Because of a recession, the inflation rate expected for the coming year is only 4%. However, the inflation rate in Year 2 and thereafter is expected to be constant at some level above 4%. Assume that the real risk-free rate is r* = 2% for all maturities and that there are no maturity premiums. If 3-year Treasury notes yield 2 percentage points more than 1-year notes, what inflation rate is expected after Year 1?

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Problem

Wilson Wonders's bonds have 12 years remaining to maturity. Interest is paid annually, the bonds have a $1,000 par value, and the coupon interest rate is 10%. The bonds sell at a price of $850. What is their yield to maturity? Round your answer to two decimal places.

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Problem

Renfro Rentals has issued bonds that have a 8% coupon rate, payable semiannually. The bonds mature in 18 years, have a face value of $1,000, and a yield to maturity of 8.5%. What is the price of the bonds? Round your answer to the nearest cent.

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Problem

Thatcher Corporation's bonds will mature in 20 years. The bonds have a face value of $1,000 and an 12% coupon rate, paid semiannually. The price of the bonds is $850. The bonds are callable in 5 years at a call price of $1,050. Round your answers to two decimal places.

What is their yield to maturity? %

What is their yield to call? %

Problem

A bond that matures in 10 years sells for $1,190.The bond has a face value of $1,000 and a yield to maturity of 9.7489%. The bond pays coupons semiannually. What is the bond's current yield? Round your answer to two decimal places.

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Problem

The real risk-free rate is 2%. Inflation is expected to be 3% this year and 5% during the next 2 years. Assume that the maturity risk premium is zero.

What is the yield on 2-year Treasury securities? Round your answer to two decimal places. %

What is the yield on 3-year Treasury securities? Round your answer to two decimal places. %

Problem

The real risk-free rate is 3%, and inflation is expected to be 4% for the next 2 years. A 2-year Treasury security yields 8.2%. What is the maturity risk premium for the 2-year security?

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Problem

Assume that the real risk-free rate, r*, is 3% and that inflation is expected to be 8% in Year 1, 6% in Year 2, and 3% thereafter. Assume also that all Treasury securities are highly liquid and free of default risk. If 2-year and 5-year Treasury notes both yield 10%, what is the difference in the maturity risk premiums (MRPs) on the two notes; that is, what is MRP5 minus MRP2? Round your answer to two decimal places.

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Problem

Jackson Corporation's bonds have 11 years remaining to maturity. Interest is paid annually, the bonds have a $1,000 par value, and the coupon interest rate is 12%. The bonds have a yield to maturity of 9%. What is the current market price of these bonds? Round your answer to the nearest cent.