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žThe two corners should be closer to 30, maybe as close as 20 feet away, when a bunter makes contact.

Please print test paper MAT137 Final Exam (Spring 2021).pdf   You may neatly copy and show all work on paper if you don’t have access to a printer. Final exam must be completed in one sitting. You only have 1 attempt to complete this exam. Please scan and upload exam paper using link provided below. 

The real risk-free rate of interest is 1 percent.  Inflation is expected to be 5 percent this  coming year, jump to 6 percent next year, and increase to 7 percent the year after (Year 3).   According to the expectations theory, what should be the interest rate on 2-year, risk-free  securities today?

The Howe family recently bought a house.  The house has a 30-year,  $225,425.00 mortgage with monthly payments and a nominal interest rate of 4 percent.  What is the total dollar amount of interest the family will pay  during the first 2 years of their mortgage?  (Assume that all  payments are made at the end of the month.)

Terry Austin is 30 years old and is saving for her retirement.  She is planning  on making 36 contributions to her retirement account at the beginning of  each of the next 36 years.  The first contribution will be made today  (t = 0) and the final contribution will be made 35 years from today (t = 35). The retirement account will earn a return of 5.7 percent a year.  If each  contribution she makes is $1,572.00 how much will be in the retirement account 35 years from now (t = 35)?

You are considering buying a new car.  The sticker price is $27,741.00 and  you have $2,267.00 to put toward a down payment.  If you can negotiate a  nominal annual interest rate of 8.4 percent and you wish to pay for the  car over a 6-year period, what are your monthly car payments?

You are considering buying a new car.  The sticker price is $34,942.00 and  you have $2,427.00 to put toward a down payment.  If you can negotiate a  nominal annual interest rate of 8.8 percent and you wish to pay for the  car over a 4-year period, what are your monthly car payments?

Suppose the real risk-free rate is 2.5%, the average future inflation rate is  1.7%, a maturity premium of 0.08% per year to maturity applies, i.e., MRP =  0.08%(t), where t is the years to maturity.  Suppose also that a liquidity premium  of 1% and a default risk premium of 0.4% applies to A-rated corporate bonds.   How much higher would the rate of return be on a 10-year A-rated corporate  bond than on a 5-year Treasury bond.  Here we assume that the pure  expectations theory is NOT valid.   

Currently, 3-year Treasury securities yield 6.7%, 7-year Treasury securities yield  6.9%, and 10-year Treasury securities yield 7.2%. If the expectations theory is  correct, what does the market expect will be the yield on 3-year Treasury securities seven years from today?

You observe the following yield curve for Treasury securities: Maturity             Yield 1 Year                1.50% 2 Years              2.60% 3 Years              3.50% 4 Years              4.00% 5 Years              4.80% Assume that the pure expectations hypothesis holds.  What does the market expect will be  the yield on 3-year securities, 2 year from today?