Assuming the expectations theory is the correct theory of the term structure, calculate the interest rates in the term structure
for maturities of one to five years, and plot the resulting yield curves for the following paths of one-year interest rates over the next five years: a. 5%, 7%, 7%, 7%, 7% b. 5%, 4%, 4%, 4%, 4% Mishkin, Frederic S.. Economics of Money, Banking and Financial Markets, The (What's New in Economics) (p. 139). Pearson Education. Kindle Edition.
1 answer:
Answer:
The plot of the yields is attached.
Explanation:
i) 6%, 7%, 8%, 7%, 6%
Interest rate on 1 year maturity = 6%/1 = 6%
Interest rate on2 year maturity = (6%+7%)/2 = 6.5%
Interest rate on 3 year maturity = (6%+7%+8%)/3 = 7%
Interest rate on 4 year maturity = (6% + 7% + 8% + 7%)/4 = 7%
Interest rate on 5 year maturity = (6% + 7% + 8% + 7% + 6%)/7 = 6.8%
ii)6%, 5%, 4%, 5%, 6%
Interest rate on 1 year maturity = 6%/1 = 6%
Interest rate on 2 year maturity = (6% + 5%)/2 = 5.5%
Interest rate on 3 year maturity = (6% + 5% + 4%)/3 = 5%
Interest rate on 4 year maturity = (6% + 5% + 4% + 5%)/4 = 5%
Interest rate on 5 year maturity = (6% + 5% + 4% + 5% + 6%)/5 = 5.2%
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Answer:
Current ratio= 1.3977
Explanation:
Current Ratio:
It is the measure of company ability to pay short term debits of one year. It also tells how company can increase its current assets.
Given:
Total assets=$689,400
Long-term debt=$198,375
Total equity= $364,182
Net fixed assets =$512,100
Sales = $1,021,500
Formula For current Ratio:
Current Ratio=