3.5 The following table gives the prices of four bonds. Bond # Bond Principal ($) 1 100 2 100 3 100 4 100 *: Half of the stated coupon is paid every six months. (a) Calculate the zero rates for maturities of 6 months, 12 months, 18 months, and 24 months. (b) What are the forward rates for the 6-month periods: months 7 to 12, months 13 to 18, months 19 to 24? (c) What are the 6-month, 12-month, 18-month, and 24-month par yields for bonds that provide semiannual coupon payments? (d) Estimate the price and yield a two-year bond providing a semiannual coupon of 7% per annum. Time to Maturity (years) 0.5 1.0 1.5 2.0 Annual Coupon ($)* 0.0 0.0 6.2 8.0 Bond Price ($) 98 95 101 104

3.5 The following table gives the prices of four bonds. Bond # Bond Principal ($) 1 100 2 100 3 100 4 100 : Half of the stated coupon is paid every six months. (a) Calculate the zero rates for maturities of 6 months, 12 months, 18 months, and 24 months. (b) What are the forward rates for the 6-month periods: months 7 to 12, months 13 to 18, months 19 to 24? (c) What are the 6-month, 12-month, 18-month, and 24-month par yields for bonds that provide semiannual coupon payments? (d) Estimate the price and yield a two-year bond providing a semiannual coupon of 7% per annum. Time to Maturity (years) 0.5 1.0 1.5 2.0 Annual Coupon ($) 0.0 0.0 6.2 8.0 Bond Price ($) 98 95 101 104

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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The table below shows the time to maturity for 3 bonds, a 2-year, 3-year, and 5- year. Each annual coupon bond has a yield to maturity of 4.36% and a coupon rate of 3.79%. Estimate the percent change in bonds price to a percent change in one plus the interest rate, assuming a 10 basis point change in the interest rates. Approximate Elasticity Maturity 2-year Bond 3-year Bond 5-year Bond
The interest rate on one-year Treasury bonds is 0.8 percent, the rate on two-year T-bonds is 0.9 percent, and the rate on three-year T-bonds is 1.0 percent. Using the expectations theory, compute the expected one-year interest rate in the second year (Year 2 only). Round your answer to one decimal place. % Using the expectations theory, compute the expected one-year interest rate in the third year (Year 3 only). Round your answer to one decimal place. %
Assume that a 5-year bond pays interest of $90 once a year (1 payment / year) and will mature for $1,000. Also assume that the yield to maturity on this bond is currently 10 percent. Given this information, determine the duration of this bond. Enter your answer in decimal format, truncated to 2 decimal places. For example, if your answer is 7.1186 years, enter "7.11".
A corporate bond has 23 years to maturity, a face value of $1,000, a coupon rate of 5.5%, and pays interest semiannually. The annual market interest rate for similar bonds is 3.3%. Part 1 What is the value of the bond? 0+ decimals
You have the following information regarding the bond ABC. Semiannual $25 payments YTM 8% Maturity (in 4. years) Par value $1,000 Let's assume the modified duration of this bond is 4. Based on this assumption and using the modified duration, estimate the price of the bond after a 65-basis-point decrease in interest rates.
You issued debt in the form of bonds, with a face value of $1,000, and have 9 years until maturity. The bonds have an annual coupon rate of 7.8%, which are paid semiannually. a. The current price is $1,100. What is the pretax cost of debt? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e. g 12.34.) b. The tax rate is 22%. What is the aftertax cost of debt? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 12.34.)
42. A bond pays 9% yearly interest in semi-annual payments for 6years. The current yield on similar bonds is 12%. To determinethe market value of this bond, you musta. find the interest factors (IFs) for 12 periods at 12%.b. find the interest factors (IFs) for 6 periods at 9%.c. find the interest factors (IFs) for 6 periods at 6%.d. find the interest factors (IFs) for 12 periods at 6%.43. What is the approximate yield to maturity for a seven-year bondthat pays 11% interest on a $1000 face value annually if thebond sells for $952a. 10.5%b. 10.6%c. 11.5%d. 12.1%44. A ten-year bond pays 11% interest on a $1000 face valueannually. If it currently sells for $1,195, what is itsapproximate yield to maturity?a. 9.33%b. 7.94%c. 12.66%d. 8.10%
3. Assume that as of today, the annualized interest rate for a seven-year bond is 10percent, while the annualized interest rate for a three-year bond is 7 percent. Use onlythis information to estimate the annualized interest rate for a four-year bond expectedin three years. Use the geometric average method. Make sure to show your work.
5. A bond is currently selling at $1,034.5. This bond has a yield-to-maturity (market interest rate) of 6.36% and a duration of 8. If the market interest rate decreases by 40 basis points, calculate the new price of the bond. 11
son.2
An insurance company is analyzing the following three bonds, each with five years to maturity, annual interest payments, and is using duration as its measure of interest rate risk. What is the duration of each of the three bonds? (Do not round intermediate calculations. Round your answers to 2 decimal places. (e.g., 32.16)) a. $10,000 par value, coupon rate=9.7%, r 0.17 b. $10,000 par value, coupon rate 11.7%, r= 0.17 c. $10,000 par value, coupon rate = 13.7%, p=0.17 Duration of the bond years
Listen Assume that there is a bond that pays $20.00 at the and of year 2, and $105.00 at the end of year 7. It sells at a total =$(20.00+105.00). The Macauley duration of the bond is? Answer with two digits decimal accuracy. Blank Excel Worksheet Your Answer

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