A) Suppose that several months of data showed the CPI increasing at a 1% annualized rate down from previous 4% rate and this caused expectations of annual inflation to also decrease from 4% to 1%. Assume, at the same time that fears of recession and default on corporate and asset backed bonds reduced the expected real rate of return required to equate investor demand to the existing supply of 1 year Treasury notes to 0.5 % from 2%. What would you expect to happen to the nominal yields on 1-year T-notes during the period over which these changes in inflation expectations and required real yields occurred? (Give a numerical answer if possible) Explain your reasoning.

B)Draw a supply/demand diagram of the US Treasury bond market to illustrate the effects on it of the developments cited in part A. Label the diagram clearly.

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A)
Prior expectation of inflation was 4%.
New expected inflation rate is 1%.
With fear of default on commercial asset backed bonds people start demanding more treasury notes. The expected real returns fall from 2% to 0.5%.

First, relate the nominal yield to the real yield.

Due to a recession, the inflation rate expected for the coming year is only 3 perecent. However, the inflation rate in Year 2 and thereafter is expected to be constant t some level above 3%. Assume that the real risk-free rate is k*= 2% for all maturities and that the expectations theory explains the yield curve,so there are n

A bond with a $114 annual coupon, maturing in 10 years at a value of $1000 has a current market price of $920. What is the nominalyield of the bond?
A)9.5%
B)12.4%
C)11.4%
D)none of the above

A corporate bond has a face value of $1,000, and pays a $50 coupon every six months (i.e., the bond has a 10 percent semiannual coupon). The bond matures in 12 years and sells at a price of $1,080. What is the bond's nominalyield to maturity

A finance problem.
Reggie White, a corporate treasurer, is trying to decide which of two 1-year securities to purchase: a negotiable CD with a nominalyield of 6 percent of a municipal security with a nominalyield of 6% or a municipal security with a nominalyield of 4.25%. The issuing municipality is not in the same state a

Swift Company has a bond outstanding with 15 years to maturity, an 8.75% coupon paid semiannually, and a $1,000 par value. The bond has a 6.50% nominalyield to maturity, but it can be called in 6 years at a price of $1,050. What is the bond's nominalyield to call?

Can you help me with this assignment?
Last year Clark Company issued a 10 year, 12% semiannual coupon bond at its par value of $1,000. Currently, the bond can be called 4 years at a price of $1,060 and it sells for $1,100.
A. What are the bond's nominalyield to maturity and its nominalyield to call? Would an investor

If the nominal interest rate is 7.5% and the expected inflation rate is 4%, what is the real rate of interest?
a) Less than 3.5%
b) Exactly 3.5%
c) Between 3.5% and 3.7%
d) Over 3.7% but less than 11.5%
e) Exactly 11.5%
f) More than 11.5%
g) The real rate of interest cannot be determined from the information provided.

As a result of a recession consumer expectations of annual inflation declined from 2% to 1.5% and, at the same time, the expected real rate of return required to equate investor demand to the existing supply of default risk- free Treasury bonds declined from 3% to 1%.
Draw a supply/demand diagram of the US Treasury bond ma

Exaplain why you would change your nominal required rate of returne if you expected the rate of inflation to go from 0 (NO INFLATION) to 4 percent. Give an example if what would happen if you didn't change your required rate of return under these conditions.