9. Interest Rates. Learning Objectives. It will be worth your time to increase your rate of interest in these topics: 1. Money market prices and rates. 2. Rates and yields on fixed-income securities. 3. Treasury STRIPS and the term structure of interest rates.
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It will be worth your time to increase yourrate of interest in these topics:
1. Money market prices and rates.
2. Rates and yields on fixed-income securities.
3. Treasury STRIPS and the term structure of interest rates.
4. Nominal versus real interest rates.
Verify that the askprice is $991,630.83
Note that this formula is correct only for maturities of six months or less. Moreover, if February 29 occurs within the next 12 months, use 366 days.
Note: The bill’s ask price differs from a previous slide by about $4 due to rounding of the reported asked yield. It’s really 3.7115% (verify using the BEY formula)
Note that when interest rates are low, the APR will be close to the EAR.
M is the number of years to maturity.
Real interest rate = nominal interest rate – inflation rate
NI = RI + IP + RP
NI = Nominal interest rate
RI = Real interest rate
IP = Inflation premium
RP = Interest rate risk premium
NI = RI + IP + RP + LP + DP