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Nikolay [14]
2 years ago
10

You note the following yield curve in The Wall Street Journal. According to the unbiased expectations theory, what is the one-ye

ar forward rate for the period beginning two years from today, 3f1? (Do not round intermediate calculations. Round your answer to 2 decimal places. (e.g., 32.16)) Maturity Yield One day 1.58 % One year 2.10 Two years 2.34 Three years 2.45
Business
1 answer:
svetoff [14.1K]2 years ago
8 0

Answer:

2.58%

Explanation:

Mathematically, the relationship between the different interest rates using the equation is shown below:

(1+S2)^2=(1+S1)^1*(1+2y1y)

The spot rate in year 2 is the same as the spot rate in year 1 multiplied by the 1-year forward rate beginning in year 2.

S2=2-year rate =2.34%

S1=1-year rate =2.10%

2y1y=one-year interest rate 2 years from now=the unknown

(1+2.34%)^2=(1+2.10%)^1*(1+2y1y)

(1+2y1y)=(1+2.34%)^2/(1+2.10%)^1

2y1y)=(((1+2.34%)^2/(1+2.10%)^1)-1

2y1y=1.025805642-1

2y1y= 2.58%

The formula shows that borrowing or lending for 2 years at 2.34% is the same as borrowing or lending at 2.10% in year and 2.58% forward rate in year 2

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A speaker seeking to express the events leading to higher interest rates should choose which pattern of organization?
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3 years ago
Consider two neighboring island countries called Felicidad and Bellissima. They each have 4 million labor hours available per mo
Ilia_Sergeevich [38]

Answer:

Bellisima's opportunity cost:  

  • Production of corn per million hours of labor = 12 / 24 = 0.5 pairs of jeans of corn
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Felicidad's opportunity cost:  

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Felicidad has a comparative advantage int he production of corn while Bellisima has a comparative advantage in the production of jeans.

If both countries specialize:

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Total production of corn has increased by 24 million bushels.

Total production of jeans has increased by 12 million pairs.

Assuming that Bellisima trades 26 million pairs of jeans and Felicidad exchanges 78 million bushels of corn, then:

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Answer:

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c. establish a record of the incident

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