# Problem 6 to 11 Liquidity Premium Theory

Problem 6 to 11 Liquidity Premium Theory
Based on economist’s forecasts and analysis, 1 year Treasury bill rates and liquidity premiums for the next four years are expected to be as follows:
R1 = 0.80%
E(2r1) = 1.95% L2 = ).07%
E(3rl)  = 2.05% L3 = 0.11%
E (4rl)  = 2.35% L4 = 0.13%
Using the liquidity premium theory, determine the current ( long- term) rates. (Do not round intermediate calculations. Round your answers to 2 decimal places.)
8. A bond issued by Ford on May 15, 1997 is scheduled to mature on May 15, 2097. If today is November 16, 2002, what is this bond’s time to maturity? ( Use 365 days a year,)
Time to maturity__________ years and _______________ months.
9. A 3.125 percent TIPS has an original reference CPI of 185.1. If the current CPI is 210.4, what is the par value and current interest payment of the TIPS? ( Do not round intermediate calculations and round your final answers to 2 decimal places,)
Interest rate                                3: 125%
Reference CPI                            185.1
Current                                        210.4
Complete the following analysis. Do not hard code value in your calculations.
Par value
Interest payment
10. A 6.50 percent coupon bond with ten years left to maturity is priced to offer a 8.0 percent yield to maturity. You believe that in one year ,the yield to maturity will be 7.0 percent. What is the change in price the bond will experience in dollars? ( Do not round intermediate calculations and round your final answer to 2 decimal places.)
Coupon rate                  6.50%
Maturity                            10
Present YTM                     8.0%
Expected YTM in 1 year         7.0%
Complete the following analysis. Do not hard code values in your calculations.
Current price
Expected price in 1 year
Change in price

Don't use plagiarized sources. Get Your Custom Essay on
Problem 6 to 11 Liquidity Premium Theory
Just from \$5/Page

## Calculate the price of your order

550 words
We'll send you the first draft for approval by September 11, 2018 at 10:52 AM
Total price:
\$26
The price is based on these factors:
Number of pages
Urgency
Basic features
• Free title page and bibliography
• Unlimited revisions
• Plagiarism-free guarantee
• Money-back guarantee
On-demand options
• Writer’s samples
• Part-by-part delivery
• Overnight delivery
• Copies of used sources
Paper format
• 275 words per page
• 12 pt Arial/Times New Roman
• Double line spacing
• Any citation style (APA, MLA, Chicago/Turabian, Harvard)

# Our guarantees

Delivering a high-quality product at a reasonable price is not enough anymore.
That’s why we have developed 5 beneficial guarantees that will make your experience with our service enjoyable, easy, and safe.

### Money-back guarantee

You have to be 100% sure of the quality of your product to give a money-back guarantee. This describes us perfectly. Make sure that this guarantee is totally transparent.

### Zero-plagiarism guarantee

Each paper is composed from scratch, according to your instructions. It is then checked by our plagiarism-detection software. There is no gap where plagiarism could squeeze in.

### Free-revision policy

Thanks to our free revisions, there is no way for you to be unsatisfied. We will work on your paper until you are completely happy with the result.