A 12-year U.S. Treasury bond with a face value of $1,000 pays a coupon of 6.00% (3.000% of face value every six months). Thereported yleld to maturity is 5.6% (a six-month discount rate of 5.6/2 = 2.8%).a. What is the present value of the bond?b. If the yleld to maturity changes to 1%, what will be the present value?c. If the yield to maturity changes to 8%, what will be the present value?d. If the yield to maturity changes to 15%, what will be the present value?(For all requirements, do not round intermediate calculations. Round your answers to 2 decimal places.)a. Present valueb. Present valuec. Present valued. Present value

Face value of the bond = $1,000 Coupon rate = 6% Semi annual coupon rate = 6%/2…

Answered: A 12-year U.S. Treasury bond with a…

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 30-year maturity bond with a face value of $1,000 making annual coupon payments with a coupon rate of 12% has a duration of 11.54 years and a convexity of 192.4. The bond currently sells at a yield to maturity of 8%. a. What is the current price of this bond? b. What would be the price of the bond if the yield falls to 7%? What price (if y = 7%) would be predicted by the duration rule? d. What price would be predicted by the duration-with-convexity rule? e. What is the percent error for each rule? What do you conclude about the accuracy of the two rules? f. Repeat your analysis if the bond's yield to maturity increases to 9%. Are your conclusions about the accuracy of the two rules consistent with your answers to parts b. to e. above?
A bond, paying semi-annual coupons of 1% per annum, matures in 18 months time, and has a dirty price of $92.66. What is the bond's yield to maturity, with semi-annual compounding?
Suppose that a 13-year bond with a face value of 2500 dollars is redeemable at par and pays semiannual coupons that increase by 1.4 percent per coupon. If the last coupon is for 70 dollars and the yield rate is 7.1 percent convertible semiannually, what is the book value of the bond immediately after the 11th coupon is paid?
A General Power bond carries a coupon rate of 9.2%, has 9 years until maturity, and sells at a yield to maturity of 8.2%. (Assume annual interest payments.) a. What interest payments do bondholders receive each year? b. At what price does the bond sell? Note: Do not round intermediate calculations. Round your answer to 2 decimal places. c. What will happen to the bond price if the yield to maturity falls to 7.2%? Note: Do not round intermediate calculations. Round your answer to 2 decimal places. A a. Interest payments b. Price c. Price will by
K Suppose that General Motors Acceptance Corporation issued a bond with 10 years until maturity, a face value of $1,000, and a coupon rate of 7.0% (annual payments). The yield to maturity on this bond when it was issued was 6.0%. Assuming the yield to maturity remains constant, what is the price of the bond immediately after it makes its first coupon payment? KIER After the first coupon payment, the price of the bond will be $. (Round to the nearest cent.)
What is the Macaulay duration of a semi-annual bond with a coupon rate of 7 percent, five years to maturity, and a current price of $959? What is the modified duration? Duration is __. years. Modified duration is __ years.
A 10-year bond has face value (redemption value) $250,000 and quarterly coupons of 2%. Consider the time right after the 12th coupon has been paid, when the yield is 3.4%. (a) What is the price of the bond? (b) Compute the price of the bond if the yield were to increase by 1 basis point (a basis point is 1/100 of 1%). What is the absolute value of the difference between that price, and your answer to part a)? (c) Would the yield have to increase or decrease in order for the bond to increase in value by $885.53? (d) Based only on your answer to b), approximately how many basis points (bp) would the yield have to move in order for the bond to increase in value by $885.53? (Answer as a positive integer.) b): #5(c): (A) Decrease (B) Increase 5(d): Answer correct to 2 decimals. Select Answer correct to 2 decimals. Answer as a positive integer
A two-year bond with par value $1,000 making annual coupon payments of $98 is priced at $1,000. Required: a. What is the yield to maturity of the bond? (Round your answer to 1 decimal place.) b. What will be the realized compound yield to maturity if the one-year interest rate next year turns out to be (a) 7.8%, (b) 9.8%, (c) 11.8%? (Do not round intermediate calculations. Round your answers to 2 decimal places.)
A 30-year maturity bond making annual coupon payments with a coupon rate of 11.00% has a ation of 13.50 years. The bond currently sells at a yield to maturity of 5.75%. Ducation a. Find the exact dollar price of the bond if its yield to maturity falls to 4.75%. What is the % change in price? b. Assume that you need to make a quick approximation using the duration rule. What is the % change in price as approximated by the duration rule when the yield to maturity falls to 4.75%? c. Does the duration-rule provide a good approximation of the % price change in this case? Why or why not?
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Consider a 2-year U.S. treasury bond that pays a coupon of 10 in one year from now and a coupon and principal of 110 in two years from now. If the expected yield-to-maturity of the bond increases from 10% to 15%, then the price of the bond changes from _________. 100 to 91.87 109.09 to 104.34 90.09 to 83.18 The interest rate of a bond is fixed and so the price never changes.
A General Power bond carries a coupon rate of 9.7%, has 9 years until maturity, and sells at a yield to maturity of 8.7%. (Assume annual interest payments.) a. What interest payments do bondholders receive each year? b. At what price does the bond sell? Note: Do not round intermediate calculations. Round your answer to 2 decimal places. c. What will happen to the bond price if the yield to maturity falls to 7.7%? Note: Do not round intermediate calculations. Round your answer to 2 decimal places. a. Interest payments b. Price c. Price will by rise fall

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