11. Consider a 2 year Treasury note. The bond pays coupons annually, with coupon rate 10% (the par value of the bond is $1,000). The market interest rate is 5% and will always be 5%. a. What is the bond price if you buy the bond today? What is the bond price if you buy the bond in six months. b. What is the bond price if you buy the bond in one year, immediately before the first coupon payment? c. What is the bond price if you buy the bond in one year, immediately after the first coupon payment? d. What is the bond price if you buy the bond in 18 months?

11. Consider a 2 year Treasury note. The bond pays coupons annually, with coupon rate 10% (the par value of the bond is $1,000). The market interest rate is 5% and will always be 5%. a. What is the bond price if you buy the bond today? What is the bond price if you buy the bond in six months. b. What is the bond price if you buy the bond in one year, immediately before the first coupon payment? c. What is the bond price if you buy the bond in one year, immediately after the first coupon payment? d. What is the bond price if you buy the bond in 18 months?

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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Similar questions

Today, you just paid $924.22 to buy a semiannual bond with 6 years to maturity. This bond carries 4% coupon rate and $1,000 par value. After exactly one year, the bond’s YTM changes to 3.60%. What is the new price of the bond?
A $1,000 bond has a coupon of 4 percent and matures after tên years. ASsume that the bond pays interest annually. a. What would be the bond's price if comparable debt yields 6 percent? Use Appendix B and Appendix D to answer the question. Round your answer to the nearest dollar. $ b. What would be the price if comparable debt yields 6 percent and the bond matures after five years? Use Appendix B and Appendix D to answer the question. Round your answer to the nearest dollar. c. Why are the prices different in a and b? The price of the bond in a is -Select- v than the price of the bond in b as the principal payment of the bond in a is -Select- v than the principal payment of the bond in b (in time). d. What are the current yields and the yields to maturity in a and b? Round your answers to two decimal places. The bond matures after ten years: CY: % YTM: % The bond matures after five years: CY: YTM:
If you buy municipal bond (tax free) that cost $1,000 and will pay a 4.7% coupon every year for the next 10 years (so the maturity date is in 10 years). At maturity the bond returns the original $1,000. If there is a 2.5% annual inflation, a) what real rate of return will you receive? b) How much real $ profit did you make from the bond?
Consider a bond issued by MGM Inc. exactly two years ago. At that time the bond’s time to maturity was 30 years. The bond pays semiannual coupons with the coupon rate of 6% per year. The face value of the bond is $1000. a. What is the bond’s price today, if today’s market interest rate for bonds of comparable maturity and default risk is 8% per year? b. You would like to speculate and believe that tomorrow the market interest rate for comparable bonds would decrease to 5%, would you buy or sell short this bond today? c. Suppose that exactly two years from today the price of the bond will be $900, what is the annual YTM at that time? Please explain without using excel
You are thinking about buying a savings bond. The bond costs $130 today and will mature in 10 years with a value of $260. What annual interest rate will the bond earn? The bond will earn 0.25%. (Round to two decimal places.) C
7. BCE bond has 10 years until maturity and a coupon rate of 8% payable annually, and sells for $1,100. a. If the BCE bond in problem 6 has a yield to maturity of 8% 1 year from now, what will its price be? (Round your answer to the nearest whole dollar.) b. What will be your rate of return if you buy it today and sell it in one year? (Round your answer to 2 decimal places. Use minus sign to enter negative rate of return, if any.) c. If the inflation rate during the year is 3%, what is the real rate of return on the bond? (Round your answer to 2 decimal places. Use minus sign to enter negative rate of return, if any.)
1) A corporate bond has a face value of $1000 with maturity date 10 years from today. The bond pays interest annually at a 7% per year based on the face value. If you want an annual rate of return of 10%/yr, how much are you willing to pay for the bond today?

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