Questions from General Investment

Q: Prices of zero-coupon bonds reveal the following pattern of forward

Prices of zero-coupon bonds reveal the following pattern of forward rates: Year Forward Rate 1……………………..5% 2……………………..7 3……………………..8 In addition to the zero-coupon bond, investors also m...

Q: You observe the following term structure: Effective Annual YTM

You observe the following term structure: Effective Annual YTM 1-year zero-coupon bond…………6.1% 2-year zero-coupon bond…………6.2 3-year zero-coupon bond…………6.3 4-year zero-coupon bond…………6.4 a. If...

Q: The yield to maturity (YTM) on 1-year zero

The yield to maturity (YTM) on 1-year zero-coupon bonds is 5%, and the YTM on 2-year zeros is 6%. The YTM on 2-year-maturity coupon bonds with coupon rates of 12% (paid annually) is 5.8%. a. What arbi...

Q: Suppose that a 1-year zero-coupon bond with face

Suppose that a 1-year zero-coupon bond with face value $100 currently sells at $94.34, while a 2-year zero sells at $84.99. You are considering the purchase of a 2-year-maturity bond making annual cou...

Q: The current yield curve for default-free zero-coupon bonds

The current yield curve for default-free zero-coupon bonds is as follows: Maturity (years) YTM (%) 1…………………..10% 2…………………..11 3…………………..12 a. What are the implied 1-year forward rates? b. Assume that...

Q: Suppose that the prices of zero-coupon bonds with various maturities

Suppose that the prices of zero-coupon bonds with various maturities are given in the following table. The face value of each bond is $1,000. Maturity (years)…………..Price 1………………………$925.93 2……………………….....

Q: Use the data from Problem 18. Suppose that you want to

Use the data from Problem 18. Suppose that you want to construct a 2-year maturity forward loan commencing in 3 years. a. Suppose that you buy today one 3-year maturity zero-coupon bond with face valu...

Q: Which of the following is true according to the pure expectations theory

Which of the following is true according to the pure expectations theory? Forward rates: a. Exclusively represent expected future short rates. b. Are biased estimates of market expectations. c. Always...

Q: Firms raise capital from investors by issuing shares in the primary markets

Firms raise capital from investors by issuing shares in the primary markets. Does this imply that corporate financial managers can ignore trading of previously issued shares in the secondary market?

Q: a. Briefly explain the concept of the efficient market hypothesis (

a. Briefly explain the concept of the efficient market hypothesis (EMH) and each of its three forms—weak, semistrong, and strong—and briefly discuss the degree to which existing empirical evidence sup...