8. Which bond is more sensitive to an interest rate change of 0.75 percent? Bond A: YTM - 4.00%, maturity - 8 years, coupon = 6% or $60, par value = $1,000. Bond B: YTM = 3.50%, maturity = 5 years, coupon = 7% or $70, par value = $1,000. %3D (a) Bond A (b) Bond B (c) Both are equally sensitive. (d) Cannot be determined

8. Which bond is more sensitive to an interest rate change of 0.75 percent? Bond A: YTM - 4.00%, maturity - 8 years, coupon = 6% or $60, par value = $1,000. Bond B: YTM = 3.50%, maturity = 5 years, coupon = 7% or $70, par value = $1,000. %3D (a) Bond A (b) Bond B (c) Both are equally sensitive. (d) Cannot be determined

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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5) Bond A is a 10-year, 8 percent annual coupon bond with a $1,000 par value. Bond B is a 10-year, 6 percent annual coupon bond with a $1,000 par value. Both bonds currently have a yield to maturity of 4 percent. Which of the following statements is correct if the market yield decreases to 2 percent? 1. Bond A will increase in value by a greater percentage than Bond B. 2. Bond B will increase in value by a greater percentage than Bond A. 3. Both bonds would decrease in value by 8.27 percent. 4. Bond B will decrease in value by a greater percentage than Bond A. 5. Both bonds will increase in value by 8.27 percent.
None
What is the correct answer - A bond with market price $104 matures at par in 5 years time. If it has acoupon of 3.625% the bond's yield to maturity is closest to: a) 3% b) 3.625% c) 2.75% d) 2%
f the interest rate increases from 2% to 4%, given the duration of the bond equals 1.5, the price of the bond will a. increase by 2.9412%. b. decrease by 2.8846%. c. increase by 0.02885%. d. decrease by 2.9412%.
7.6 For a particular bond market, zero-coupon bonds with face value $100, re-deemable at par, are priced as follows: • bonds redeemable in exactly 1 year are priced at $98, • bonds redeemable in exactly 2 years are priced at $93, • bonds redeemable in exactly 3 years are priced at $89, • bonds redeemable in exactly 4 years are priced at $85.50. Find the yield to maturity of a bond redeemable at 103% of the face value in 4 years with annual coupons of 5%.
K Using the formula given below: F-P P if the market price of a $1,000-face-value discount bond changes from $925 to $950, the yield to maturity decreases by%. (Round your response to two decimal places.) Rbonds =
Refer to Table 10-2. a. Assume the interest rate in the market (yield to maturity) goes down to 8 percent for the 10 percent bonds. Using column 2, indicate what the bond price will be with a 10-year, a 20-year, and a 25-year time period. b. Assume the interest rate in the market (yield to maturity) goes up to 12 percent for the 10 percent bonds. Using column 3, indicate what the bond price will be with a 10-year, a 20-year, and a 25-year period. c. Assume the interest rate in the market (yield to maturity) goes down to 8 percent for the 10 percent bonds. If interest rates in the market are going down, which bond would you choose to own? multiple choice 1 10 Years 20 Years 25 Years d. Assume the interest rate in the market (yield to maturity) goes up to 12 percent for the 10 percent bonds. If interest rates in the market are going up, which bond would you choose to own? multiple choice 2 10 Years 20 Years 25 Years
7A-2 Consider each of the bonds below: 7A-2.Bond A has an 8-year maturity and a 7% annual coupon.Bond B has a 10-year lifespan and a 9% annual coupon.Bond C has a 12-year maturity with no coupon.The bonds have a $1,000 face value and an 8% yield to maturity. Which of the comments below is the most accurate?a. Bond A is sold at a discount, while Bond B is sold at a higher price.b. Bond C would see the highest percentage rise in price if the yield to maturity of each bond drop to 7%.c. Bond C has the highest chance of reinvestment pace.d. Both a and b are right statements.e. All of the above claims are true.
Consider the following two-bond portfolio of option-free bonds; Bond A Bond B Years to maturity 5 years 10 years Coupon rate 5% 5% Par value 1000 1000 Yield to maturity 8% 6% Par amount owned R3,45 million R2 million Market value R30 367.59 (in 000’s) R18 528 (in 000’s) Assuming that Bond A is an option-free bond, calculate the bond’s modified duration using Macauly’s Duration.
Question 2 a. A bond that matures in one year has a $500 face value and a $60 coupon. What is the price of the bond if the interest rate is 6 percent and the bond was purchased by the present owner for $450? b. A bond that matures in two years has a face value equal to F and a coupon equal to R. Suppose that the yield to maturity, i, is such that i = ( R / F ). The price of the bond equals... F F/(1+i) F(1+i) F/i Answer both otherwise don't do that I will Dounvote
What is assumed the be the face value aka par value aka principal aka loan amount of a bond? It's also assumed to be a bond's FV. 10% $0 $100 $1,000
Question Given the following information about a bond, calculate the modified duration of the bond. i) The term-to-maturity is two years. ii) Coupons are payable annually at 5%. iii) The bond is trading at par. Possible Answers A B D 1.859 с 1.928 E 1.881 1.952 Cannot be determined since the yield rate i is not provided.

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