80353031333638File Edit View Insert Format Data Tools Help% .0A)Face valuMaturityTax rateDiff7+=fx1100% - $BphpYfZe9p.pngSheet1MUNType here to search120 Price.00 123-0.00000%JNING AAA, DETreasury BondCouponrate(paidsemiannually5%100 Face valu6 Maturity)DMOD FORNELIODER JODAS:4. At what tax rate will an investor be indifferent between the below bonds, assuming the municiple bond is insured against default?Show your calculationsMuni BondPriceCouponrate(paidsemiannually100.45image.pngDefault (Ca...1006EEte all>F|| BBM MODE: DANMB IS AHLIMONE DONN11J11#£- |1KXL

Tax equivalent yield is the yield which investors would expect to earn on taxable securities so that…

35 30 31 32 33 34 35 36 37 38 39 40 41 42 A 1 fx ) Face value Maturity Tax rate YTM TEY Diff B C Treasury Bond 120 Price 0.00000% D Coupon rate (paid semi annually 5% ) 100 Face value 6 Maturity 4. At what tax rate will an investor be indifferent between the below bonds, assuming the municiple bond is insured against default? Show your calculations Muni Bond Price Coupon rate (paid semi annually 100.45 E 2% 100 6 F G H 1 J K

35 30 31 32 33 34 35 36 37 38 39 40 41 42 A 1 fx ) Face value Maturity Tax rate YTM TEY Diff B C Treasury Bond 120 Price 0.00000% D Coupon rate (paid semi annually 5% ) 100 Face value 6 Maturity 4. At what tax rate will an investor be indifferent between the below bonds, assuming the municiple bond is insured against default? Show your calculations Muni Bond Price Coupon rate (paid semi annually 100.45 E 2% 100 6 F G H 1 J K

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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4.
Prices of zero-coupon bonds reveal the following pattern of forward rates: Year 123 3 Forward Rate 6% 9 8 In addition to the zero-coupon bond, investors also may purchase a 3-year bond making annual payments of $35 with par value $1,000. a. What is the price of the coupon bond? (Do not round intermediate calculations. Round your answer to 2 decimal places.) b. What is the yield to maturity of the coupon bond? (Do not round intermediate calculations. Round your answer to 2 decimal places.) c. Under the expectations hypothesis, what is the expected realized compound yield of the coupon bond? (Do not round intermediate calculations. Round your answer to 2 decimal places.) d. If you forecast that the yield curve in 1 year will be flat at 10.0%, what is your forecast for the expected rate of return on the coupon bond for the 1- year holding period? (Do not round intermediate calculations. Round your answer to 2 decimal places.) a. Price b. Yield to maturity c. Realized compound yield d.…
esc If 1 2 3 4 5 6 7 8 10 11 13 14 16 19 1. Find the Yield to Maturity (YTM) for the following government bonds Price Semi-ann Face valu Maturity YTM YTM Semi-ann Face valu Maturity Price YTM Semi-ann Face valu Maturity E 99.83 2.25% 100 3 2.31% ? 2.64% 2.38% 100 4 Q 2. Based on the following YTM for the various maturities, what price are these government bonds trading at? -$99.02 4.00% 3.57% 100 Type here to search Sheet1 f2 Price Semi-ann Face valu Maturity YTM a 3. What is the semi-annual coupon rate on the following government bonds? 2 YTM Semi-ann Face valu Maturity Price YTM Semi-ann Face valu Maturity W f3 # 98.45 2.50% 100 * 2.61% 3 2.17% 2% 100 2 4.30% 100 15 f4 Price Semi-ann Face valu Maturity YTM $ T YTM Semi-ann Face valu Maturity Price YTM Semi-ann Face valu Maturity 99.25 2.75% 100 10 2.84% f5 3% 5.50% 100 20 -$137.39 olo 5% 100 LO 5 TE Price Semi-ann Face valu Maturity YTM f6 YTM Semi-ann Face valu Maturity 97.59 3% 100 30 3.12% 17 6% 5.96% 100 30 hp &
Vijay
18. Xcel Using a Spreadsheet to Calculate Bond Values: What is the bond quote for a $1,000 face value bond with an 8 percent coupon rate (paid semiannually) and a required return of 7.5 percent if the bond is 6.48574, 8.47148, 10.519, and 14.87875 years from maturity? (LG 6-2) Face Value 100% 100 100 100 Periodic Coupon Payment 6.48574 × 2 = 12.97148%/2 = 4% Total Payments 8.47148 x 2 = 16.94296 10.519 x 2 = 21.0380 14.87875 x 2 = 29.7575 4 4 4 Required Return 7.5% 7.5 7.5 7.5 The Bond Value Will Be 102.531% 103.094 103.594 104.437
Y8
2
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Q.22 You are considering an investment in 30 year bond issued by Toy Company. The bonds have no special covenants and the 1 yr T bills are currently earning 5.25% The following information is available: Real risk free rate = 2.25% Default Risk Premium = 1.25% Liquidity risk premium = 0.50% Maturity Risk Premium = 2.00% What is the inflation premium?
Bond Price ($) 50 3,300 3,000- 2,500- 2,000- 1,500- 1,000 810.71- 500- 0 5 10 8 Interest Rate (%) Convexity 15 6 717) The shape of the curve implies that an increase in the interest rate results in a price decline that is smaller than the price gain resulting from a decrease of equal magnitude in the 8 interest rate. This property of bond price is called? 19 20 Duration G 118) The Tangent line represented on the chart is a representation of an estimation of bond price change relative to a change in interest rate. It is known as? 52 Higher H 53 54 55 19) If Duration is estimation of an approximate change in price relative to a change in interest rate, the error in approximation will be (Higher/Same/Lower) for abond with higher 56 convexity? 57 58 co
Q12
6

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