8.5 You want to construct a bond portfolio toimmunize the interest-rate risk of a liability of$2,000 after 10 years. You have the choice ofthree annual coupon bonds with the followinginformation:Bond 1 Bond 2 Bond 33%Coupon rateFace value0%5%$100$1,000 $1,000Macaulay duration 12 years 8 years 9 yearsWhich bonds can you choose to form the bondportfolio?A. Bond 3B. A mix of Bonds 1 and 2C. A mix of Bonds 2 and 3D. None of the above.

Macaulay duration is the time period an investor must hold the security so that the initial price…

8.5 You want to construct a bond portfolio to immunize the interest-rate risk of a liability of $2,000 after 10 years. You have the choice of three annual coupon bonds with the following information: Coupon rate Face value Macaulay duration Bond 1 Bond 2 Bond 3 0% 3% 5% $100 $1,000 $1,000 12 years 12 years 8 8 years years 9 years Which bonds can you choose to form the bond portfolio?

8.5 You want to construct a bond portfolio to immunize the interest-rate risk of a liability of $2,000 after 10 years. You have the choice of three annual coupon bonds with the following information: Coupon rate Face value Macaulay duration Bond 1 Bond 2 Bond 3 0% 3% 5% $100 $1,000 $1,000 12 years 12 years 8 8 years years 9 years Which bonds can you choose to form the bond portfolio?

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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Part a: You are considering investing in a 9 year bond with a face value of $10,000, an annual coupon rate of 8% and a yield to maturity of 12%. Part b: Assume that you purchased the bond. Three years later, after you have received the first three coupons, your broker tells you the bond is now trading at a yield to maturity of 7.6%. QUESTION: What annual rate of return would you have earned if you purchased the bond in part a and sold it in part b?
A bond that matures in 10 years has a $1,000 par value. The annual coupon interest rate is 8 percent and the market's required yield to maturity on a comparable-risk bond is 13 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? Question content area bottom Part 1 a. The value of this bond if it paid interest annually would be $enter your response here.
Assume you can buy a bond that has a par value of $1000, matures in 10 years, yielding 6% and has a duration of 5. If you would like to use this bond to form a guaranteed investment contract “GIC” and offer a guaranteed rate of return to investors for certain years. a. what is the maximum yield you can offer? Why? Explain. b. For how many years would you make the guarantee? Explain.
What price would you pay for a 10-year, AA bond with a Face Value of $1,000 and a coupon rate of 7.10%?
4. Size of Accounts Receivable [LO1] Skye Flyer, Inc., has weekly credit sales of $21,900, and the average collection period is 33 days. What is the average accounts receivable figure?
es Find the duration of a 6.6% coupon bond making semiannually coupon payments if it has three years until maturity and has a yield to maturity of 6.6%. What is the duration if the yield to maturity is 9.0%? Note: The face value of the bond is $1,000. Do not round intermediate calculations. Round your answers to 2 decimal places. 6.6% YTM 9% YTM Duration years years
A P5000 par value bond bearing a coupon rate of 8 percent will mature after 7 years. What is the value of the bond, if the discount rate is 12 percent? Please provide solutions to your answers.
1)Your broker offers to sell for $1,157 a AAA-rated bond with a coupon rate of 7 percent and a maturity of six years. Given that the interest rate on comparable debt is 4 percent, calculate the bond's price. Assume that the bond pays interest annually. Use Appendix B and Appendix D to answer the question. Round your answer to the nearest dollar. 2)Is your broker fairly pricing the bond? 3)the bond should or should not be purchased?
If you have a bond with a price of $1,271.81, coupon of 12%, and the market interest rate is 8%, what is the term of the bond? Question 22 options: 20 years 10.2 years 10 years 3.83 years
Give only typing answer with explanation and conclusion
You purchase a 3-year coupon bond at the par value today. The information of this coupon bond is shown below: annual coupon rate: 10% face value: $1,000 What is the YTM of this bond today? Suppose the annual reinvestment rate is 8% for the next two years. What is the realized compound yield if you sell this bond at the end of year 2? O a. 10 % ; 10.75% O b. 10%; 10% O c. 10.75%; 10.75% O d. 8%; 9% k
Consider the following bond: a 19-years $1,000 callable bond with 9 years until the next call date. The call price (the price the firm will need to pay bondholders if it uses its option to call the bond) on the bond is $1,050. The bond pays yearly coupons at a rate of 6.50% and the yield on the bond is 5.75%. Calculate the yield to call on this bond.

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