8- Consider an inflation protected bond with following characteristics. The bond promises annual coupons and face value that respectively have the purchasing power equivalent to 25$ and 1000$ today. The bond expires in 20 years. What is the real yield for this bond? The bond is traded at 1097.48$ today.

8- Consider an inflation protected bond with following characteristics. The bond promises annual coupons and face value that respectively have the purchasing power equivalent to 25$ and 1000$ today. The bond expires in 20 years. What is the real yield for this bond? The bond is traded at 1097.48$ today.

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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A Treasury bond has a face value of $100, a maturity of 20 years, a coupon of 4%, and pays the coupon every six months, at the end of each six month period. The price of the bond is $105. What is the yield of this bond? a. 3.65% b. 1.8% C. 1.7% d. 3.8%
A bond that matures in 1212 years has a $1 comma 0001,000 par value. The annual coupon interest rate is 1414 percent and the market's required yield to maturity on a comparable-risk bond is 1515 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?
Bond X is a premium bond making semiannual payments. The bond has a coupon rate of 9 percent, a YTM of 7 percent, and 15 years to maturity. Bond Y is a discount bond making semiannual payments. This bond has a coupon rate of 7 percent, a YTM of 9 percent, and also has 15 years to maturity. Both bonds have a par value of $1,000. a. What is the price of each bond today? b. If interest rates remain unchanged, what do you expect the price of these bonds to be 1 year from now? In 6 years? In 10 years? In 14 years? In 15 years? Note: For all requirements, do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16. a. Price today b. Price in 1 year Price in 6 years Price in 10 years Price in 14 years Price in 15 years Bond X Bond Y
9. A bond has a time-to-maturity of 8 years, a coupon rate of 5%, is currently selling for $1021.35. What is the bond's yield if it pays interest annually? A. 4.6740%. B. 5.6874%. C. 3.2654%. D, 4.0258%.
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?
A bond is currently selling for $1040. It pays the amounts listed in the picture at the ends of the next six years. The yield of the bond is the interest rate that would make the NPV of the bond’s payments equal to the bond’s price. Use Excel’s Goal Seek tool to find the yield of the bond.
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?
4. A bond with a coupon rate of 7.30% has a price that today equals $868.92. The $1,000 face value bond pays coupon every 6 months, 30 coupons remain, and a coupon was paid yesterday. Suppose you buy this bond at today’s price and hold it so that you receive 20 coupons. You sell the bond upon receiving that last coupon. Find the selling price if the bond’s YTM remains constant.
8. A bond has just been issued. The bond has an annual coupon rate of 12% and coupons are paid annually. The bond has a face value of $1,000 and will mature in 20 years. The bond’s yield to maturity is 14%. a.Using Excel’s Data Table feature to construct a Two-Way Data Table to demonstrate the impact of the coupon rate and the time to maturity on the bond’s duration using: i. Coupon Rates of 0%, 6%, 12%, and 18%.ii. Maturities of 5 years, 10 years, 15 years, and 20 years. b. What duration principles are demonstrated in this table? c.How could investors apply these duration principles to make bond investment decisions?
5) A 6-year 7.2% annual coupon bond is selling to yield 6.5%. The bond pays interest annually. The par value of the bond is $100. a. What is the price of the 6-year 7.2% coupon bond selling to yield 6.5%? b. What is the price of this bond one year later assuming the yield is unchanged at 6.5%? c. Suppose that one year later the yield of the bond decreases to 6.3%. What is the price change attributable to moving to maturity assuming no change in the discount rate? What is the price change attributable to a decrease in the discount rate from 6.5% to 6.3%? What is the total price change?
8. A bond has a face value of $3000 6 years from today and pays semiannual coupons at a coupon rate of 7%. If the YTM rate is 6%, What is the price of the bond today? 9. A bond has a face value of $5000 and matures 4 years and 6 months from today. It pays semiannual coupons at a coupon rate of 5%. If the bond is selling for $4500, then what is its YTM?

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