1. Consider the following four bonds (assuming semi-annual compounding and the par value of $1,000) A 10% 10 Coupon Rate Maturity (years) B 10% 25 40 a) What is the price of each bond if the required yield is 10%? b) What is the price of each bond if the required yield decreases from 10% to 9%, and by what percentage did the price of each bond change? c) What is the price of each bond if the required yield increases from 10% to 11%, and by what percentage did the price of each bond change? d) e) f) Comparing bonds A and D, what can you say about the relative price volatility of a bond with lower coupon rate compared to one with higher coupon rate? C 10% D 12% 10 From your answers to Question 1, parts b and c, what can you say about the relative price volatility of a bond when the yield decreases compared to when the yield increases? Comparing bonds A, B, and C, what can you say about the relative price volatility of a bond with longer maturity compared to one with shorter maturity?

1. Consider the following four bonds (assuming semi-annual compounding and the par value of $1,000) A 10% 10 Coupon Rate Maturity (years) B 10% 25 40 a) What is the price of each bond if the required yield is 10%? b) What is the price of each bond if the required yield decreases from 10% to 9%, and by what percentage did the price of each bond change? c) What is the price of each bond if the required yield increases from 10% to 11%, and by what percentage did the price of each bond change? d) e) f) Comparing bonds A and D, what can you say about the relative price volatility of a bond with lower coupon rate compared to one with higher coupon rate? C 10% D 12% 10 From your answers to Question 1, parts b and c, what can you say about the relative price volatility of a bond when the yield decreases compared to when the yield increases? Comparing bonds A, B, and C, what can you say about the relative price volatility of a bond with longer maturity compared to one with shorter maturity?

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Suppose a 10-year, $1,000 bond with a coupon rate of 8.9% and semiannual coupons is trading for $1,035.75. a. What is the bond's yield to maturity (expressed as an APR with semiannual compounding)? b. If the bond's yield to maturity changes to 9.9% APR, what will be the bond's price? a. What is the bond's yield to maturity (expressed as an APR with semiannual compounding)? The bond's yield to maturity is %. (Round to two decimal places.)
Nikul
Suppose a 10-year, $1,000 bond with a coupon rate of 8.8% and semiannual coupons is trading for $1,034.19. a. What is the bond's yield to maturity (expressed as an APR with semiannual compounding)? b. If the bond's yield to maturity changes to 9.9% APR, what will be the bond's price? a. What is the bond's yield to maturity (expressed as an APR with semiannual compounding)? The bond's yield to maturity is ☐ %. (Round to two decimal places.)
Bond P is a premium bond with a 10 percent coupon. Bond D is a 6 percent coupon bond currently selling at a discount. Both bonds make annual payments, have a YTM of 8 percent, and have five years to maturity. (Assume par value of K1,000)(i) What is the current yield for Bond P and Bond D?(ii) If interest rates remain unchanged, what is the expected capital gains yield over the next year for Bond P? For Bond D?(iii)Explain your answers and the interrelationship among the various types of yields.
5. A 5-year bond with a yield of 7% (continuously compounded) pays an 8% coupon at the end of each year. What is the bond's price? What is the bond's duration? Use the duration to calculate the effect on the bond's price of a 0.2% decrease in its yield.
K Assume that a bond will make payments every six months as shown on the following timeline (using six-month periods): Period 0 2 Cash Flows $19.12 $19.12 a. What is the maturity of the bond (in years)? b. What is the coupon rate (as a percentage)? c. What is the face value? a. What is the maturity of the bond (in years)? The maturity is years. (Round to the nearest integer.) 39 $19.12
Assume that a bond will make payments every six months as shown on the following timeline (using six- month periods): Period 0 Cash Flows $20.87 a. What is the maturity of the bond (in years)? b. What is the coupon rate (as a percentage)? c. What is the face value? 2 $20.87 *** a. What is the maturity of the bond (in years)? The maturity is years. (Round to the nearest integer.) 39 $20.87 40 $20.87 + $1,000
D4) Suppose that there is 30-year coupon bond with par value of $100 and Macaulay duration of 20.56. The coupon rate is unknown. Currently, the bond is traded at $90 and the yield is flat at 20% pa. Yield to maturity is an annualized simple interest rate compounded annually. If the bond yield increases by 50 basis points, what is the approximation of the percentage capital gain or loss? Please choose the correct range for the percentage capital gain/loss, i.e., if it is -3.5%, please select “A value between -3% and -4%” A value between -9% and -10% A value between -8% and -9% None of the other answers are correct. A value between -7% and -8% A value between -10% and -11%
Consider a 30-year Bond with $1,000 face value, which offers 10% annual coupon, paid once a year.Assume that interest rates, hence YTM (Yield to Maturity) changed from 6% to 7%. What is the duration of the Bond in years? Enter your answer in the following format: 12.34Hint1: Answer is between 10.24 and 12.77Hint2: Duration = (new bond price - old bond price) * (-100) / old bond price
a) A bond has 15 years left to maturity. The annual coupon rate is 9%, and face value is $1,000. If the YTM = 12%, what is the bond price? b) An annual coupon bond has coupon payment = $500, YTM =8%, and maturity = 5 years. If the price ofthe bond is $9,400, what must be the face value? c)A bond has 15 years left to maturity. The semi-annual coupon rate is 9%, and face value is $1,000. If the YTM = 12%, what is the bond price? for all 3 parts please show all calculations via excel, and how you got them in excel (formulas). thanks.
A bond: pay $75 each year in interest, and a $1,000 payment at maturity. The $1,000 is called? A) couponB) face valueC) discountD) yield
Assume that a bond will make payments every six months as shown on the following timeline (using six-month periods):

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