5. On December 1, 2005, the US Treasury issued a 2-year coupon bond with a coupon rate of 5% thatpays coupons semi-annually (on June 1 and December 1).a. If the yield to maturity of this bond when it was issued was 6% (stated as an APR with k=2),what was the price per $100 of face value when it was issued? b. What should be the market price per $100 face value of the bond from part c) on June 2, 2007(just after the third coupon payment was made)? Use the information below for the Treasuryyield curve on June 2, 2007. Note that yields listed below are stated as APRS (k=2).5-year6.00%Maturity3-month 6-month 1-year3.50%2-yearYield to Maturity (APR)4.00%4.50%5.00%

A bond is a debt security under which the borrower promises to pay a fixed interest to the lender…

5. On December 1, 2005, the US Treasury issued a 2-year coupon bond with a coupon rate of 5% that pays coupons semi-annually (on June 1 and December 1). a. If the yield to maturity of this bond when it was issued was 6% (stated as an APR with k=2), what was the price per $100 of face value when it was issued?

5. On December 1, 2005, the US Treasury issued a 2-year coupon bond with a coupon rate of 5% that pays coupons semi-annually (on June 1 and December 1). a. If the yield to maturity of this bond when it was issued was 6% (stated as an APR with k=2), what was the price per $100 of face value when it was issued?

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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1. 8990 Holdings, Inc. issued a bond on July 16, 2016 that matures in October 16, 2020. This means that the term of the bond is 5 years. Coupon payments will be made every quarter with a rate of 6.21% per annum. Assume that the face value is P10,000 and investor have required rate of return of 10%. The coupon payment per quarter would be? a. P621.00 b. P155.25 c. P310.50 d. P250.00
12. Suppose that you buy a 1-year maturity bond for $1,000 which is a real return bond with a coupon rate of 4%. What will the cash flow provided by the bond be for each of the four inflation rates? What will be the real and nominal rates of return on the bond in each scenario? (Do not round intermediate calculations. Round your answers to 2 decimal places.) a. The inflation rate is 2%. b. The inflation rate is 4%.
you invested in a corporate bond that has a market price today of R983.87and a yield to maturity of 7%. This bond has a modified duration of 5.3. You believe that interest rates are going to rise by 106 basis points. What price do you expect your bond to trade at if this anticipated change in the yield occurs?Use the duration rule to calculate your answer , in rands (R), correctto Two decimal places.
A 7.75% fixed coupon bond maturing on April 21, 2010 is priced at $995 on December 20, 2001. The bond is callable on December 20, 2005 for $1,150. What is the annual bond equivalent yield to call on December 20, 2001? (3 decimal places) IT IS NOT 10.698%
A BBB-rated corporate bond has a yield to maturity of 13.2%. A U.S. Treasury security has a yield to maturity of 11.8%. These yields are quoted as APRS with semiannual compounding. Both bonds pay semi-annual coupons at a rate of 12.7% and have 5 years to maturity. a. What is the price (expressed as a percentage of the face value) of the Treasury bond? b. What is the price (expressed as a percentage of the face value) of the BBB-rated corporate bond? c. What is the credit spread on the BBB bonds?
Pa.2
(Related to Checkpoint 9.4) (Bond valuation) A bond that matures in 19 years has a $1,000 par value. The annual coupon interest rate is 13 percent and the market's required yield to maturity on a comparable-risk bond is 12 percent. 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? a. The value of this bond if it paid interest annually would be $ (Round to the nearest cent.)
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
3. The U.S. Government has a 20-year bond that matures 20 years from now and has a face value of $1,000. The bond has a coupon rate of 3.1% per year, paid semiannually. The yield on the bond is 8%. If coupons are reinvested at 3.6% per annum, then how much interest is earned on reinvested coupons over the life of the bond? Calculate the interest as a percentage of the total cash flows received by the bondholder. What is the amount of interest earned on reinvesting the coupons? $ (Round to the nearest cent.) What percentage of the total cash flows received by the bondholder is the interest earned on the reinvested coupons? % (Round to two decimal places.)
4. Suppose that the market rate of interest is 12 per cent on a government bond with a perpetuity payment, which is a coupon value (annual payment) of £6 per year indefinitely. The face value of the loan is £100. a) Define and calculate the price of the bond? Answers.. b) At what yield (or rate) will the loan be trading at par? Explain whether it is trading above or below par in a). Answers... c) Assume that the rate of interest is 'expected' to drop to 3 per cent, derive and calculate the rate of capital gain (or loss)? Answers . d) Derive and explain the expression for the number of bonds held representing the amount of money spent on bonds (B) with the corresponding mean rate of return (HR). Answers.. e) Imagine that W = £40,000, what is the amount spend on bonds, B', if the standard deviation (SD) of earnings (s) is equal to 0.10 with a 3,000,the SD of the total return on bonds, SR. What is the money holding, which is M*? Answers.. Find the mean return on bonds with u = 1. Answer..
H3. The face value of a bond is $1000. This bond has a coupon rate of 6% compounded semi-annually with a prevailing interest rate of 6.5% compounded semi-annually. If this is a 10-year bond, what is this bond valued at initially?
A3)

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