2) A ten-year, 1000 TL Nominal value bond with an 30% coupon rate and semi-annual coupons is trading for a price of 1,150.00 TL. a) What is the bond's yield to maturity? b) If the bond's yield to maturity changes to 40%, what will the bond's price be?

2) A ten-year, 1000 TL Nominal value bond with an 30% coupon rate and semi-annual coupons is trading for a price of 1,150.00 TL. a) What is the bond's yield to maturity? b) If the bond's yield to maturity changes to 40%, what will the bond's price be?

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 that a 1-year zero-coupon bond with face value $100 currently sells at $90.44, while a 2-year zero sells at $82.64. You are considering the purchase of a 2-year-maturity bond making annual coupon payments. The face value of the bond is $100, and the coupon rate is 12% per year. Required: a. What is the yield to maturity of the 2-year zero? b. What is the yield to maturity of the 2-year coupon bond? c. What is the forward rate for the second year? d. If the expectations hypothesis is accepted, what are (1) the expected price of the coupon bond at the end of the first year and (2) the expected holding-period return on the coupon bond over the first year? e. Will the expected rate of return be higher or lower if you accept the liquidity preference hypothesis? Complete this question by entering your answers in the tabs below. Required A Required B Required C Required D Required E Will the expected rate of return be higher or lower if you accept the liquidity preference hypothesis?…
Consider a 5 year non-call 3 year bond that is callable in 3 year and 4 year at prices of 101 and 100. It pays an annual coupon of 4% and is priced at 101. What is the yield-to-worst for this bond?
Consider a bond selling at par with a coupon rate of 6% and 10 years to maturity. The issuer makes semi-annual coupon payments. What is the price of this bond if the required yield is 15%? What if the yield is 16%? $563.34 for 15%, and $591.87 for 16% $541.25 for 15%, and $509.09 for 16% $509.09 for 15%, and $541.25 for 16% $525.41 for 15%, and $590.90 for 16%
Suppose you have a 10-year bond (the bond will mature in 10 years), with a coupon rate of 2.45%. Coupons are paid on a semi-annual basis. The face value of the bond is $1000. Suppose the bond's yield to maturity suddenly increases from 2.13% to 2.63%. What is the impact on the price of the bond in percentage terms? Justify all of your response.
A bond that matures in13years has a$1,000par value. The annual coupon interest rate is8percent and the market's required yield to maturity on a comparable-risk bond is12percent. What would be the value of this bond if it paid interest annually? What would be the value of this bond if it paid interest semiannually?
Firm ABC has a bond with face value of $100, coupon rate of 6%, and a 10-years maturity. Firm ABC makes semi-annual coupon payments. Investors require a return of 7%. (1) What is the present value of all coupon payments? (2) What is the present value of face value? (3) What is the value of the bond? (4) If the price of the bond is $100, will you invest in such a bond? (5) If interest rate goes up by 2%, what will be the value of the bond? (6) What will be the rate of change in the value of the bond compared to the value of (3) above?
Suppose that a 1-year zero-coupon bond with face value $100 currently sells at $89.75, while a 2-year zero sells at $79.88. You are considering the purchase of a 2-year-maturity bond making annual coupon payments. The face value of the bond is $100, and the coupon rate is 10% per year. Required: What is the yield to maturity of the 2-year zero? What is the yield to maturity of the 2-year coupon bond? What is the forward rate for the second year? If the expectations hypothesis is accepted, what are (1) the expected price of the coupon bond at the end of the first year and (2) the expected holding-period return on the coupon bond over the first year? Will the expected rate of return be higher or lower if you accept the liquidity preference hypothesis?
The YTM on a bond is the interest rate you earn on your investment if interest rates don't change. If you actually sell the bon before it matures, your realized return is known as the holding period yield (HPY). a. Suppose that today you buy an annual coupon bond with a coupon rate of 8 percent for $815. The bond has 7 years to maturity and a par value of $1,000. What rate of return do you expect to earn on your investment? Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.1m b-1. Two years from now, the YTM on your bond has declined by 1 percent, and you decide to sell. What price will your bond sell for? Note: Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16. b-2. What is the HPY on your investment? Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.1 Answer is complete but not entirely correct. 12.00 %…

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