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Question 7 Based on the data in the table, calculate the implied forward one-year rate of...

Question 7 Based on the data in the table, calculate the implied forward one-year rate of interest three years from now (t=0) (i.e. compute the expected interest rate between the end of year three and the start of year four). Yields to maturity of U.S. Treasury securities as of today is as follows: Term to Maturity (Years) Yield to Maturity 1 1% 2 2% 3 2.5% 4 3% 5 4% 10 5% 0.020 0.045 0.055 0.060 0.080

Question 11 You have been given this probability distribution (the same as in the previous question) for the holding period return for XYZ stock: State of the Economy Probability HPR Boom .25 25% Normal Growth .50 10% Recession .25 -5% What is the expected standard deviation for XYZ stock? 10.606% 10% 112.5% 11.25% none of the above

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Answer #1

Hi,

Q 7 is not clear. The table is missing

Q8 . Boom probability => 0.25, Normal probability => 0.5 , Recession => 0.25 , so 0.25*25% + 0.5*10% + 0.25*-5% =>10%,

so 10% is the right answer

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