A 30-year bond has an annual coupon rate of 6% for the first ten years, 7% for the next ten years, 8% for the last ten years, and matures at its par value of 100. The bond is bought to produce an effective annual yield rate of 7%. Determine an expression for the price of the bond. (All interest functions are at 7%) B 60+7¹ D C 100 100-100+10 70+100 80% para 100+ 0+²⁰05-06 100 (1.06) (1.07) (1.08)

A 30-year bond has an annual coupon rate of 6% for the first ten years, 7% for the next ten years, 8% for the last ten years, and matures at its par value of 100. The bond is bought to produce an effective annual yield rate of 7%. Determine an expression for the price of the bond. (All interest functions are at 7%) B 60+7¹ D C 100 100-100+10 70+100 80% para 100+ 0+²⁰05-06 100 (1.06) (1.07) (1.08)

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 25-year coupon bond pays an annual coupon of 5 and has a face value of100. If the current price is 100, what is the yield to maturity? (b) The current (year t) price of a 5-year coupon bond is 100. It has a coupon rateof 5%, a yield to maturity of 5% and a face value of 100. In year t +1 newsarrives that short term interest rates will be twice as high for the foreseeablefuture. What is the percentage change in the price of the bond? Why did thebond’s price have to change in this way?(c) The expectations hypothesis says that the yield to maturity on an n year riskfree bond equals a constant risk premium plus the expected average of shortrates over the life of the bond. Which prediction of this theory is rejected bythe data and what amendments to the theory have been proposed in responseto this rejection?
A $1,000 bond has a coupon of 4 percent and matures after tên years. ASsume that the bond pays interest annually. a. What would be the bond's price if comparable debt yields 6 percent? Use Appendix B and Appendix D to answer the question. Round your answer to the nearest dollar. $ b. What would be the price if comparable debt yields 6 percent and the bond matures after five years? Use Appendix B and Appendix D to answer the question. Round your answer to the nearest dollar. c. Why are the prices different in a and b? The price of the bond in a is -Select- v than the price of the bond in b as the principal payment of the bond in a is -Select- v than the principal payment of the bond in b (in time). d. What are the current yields and the yields to maturity in a and b? Round your answers to two decimal places. The bond matures after ten years: CY: % YTM: % The bond matures after five years: CY: YTM:
Consider a bond paying a coupon rate of 9.5% per year quarterly when the market interest rate is 5.25% per half-year. The bond has four years until maturity. a. Find the bond’s price today and nine months from now. b. What is the total rate of return on the bond?
a $1000 par value bond with 32 years to maturity has an 8.2% coupon rate with semi-annual interest payments. if the yield to maturity is 7.5%, what is the present value of the bond? 1,084.49 1,084.11 1,064.60 1,821.32 1,092.42
A 27-year bond, with a price equal to 75% of its face value, offers annual coupons with the coupon rate equal to 217 of the annual effective yield rate. An n-year zero-coupon bond has the same price, face value, and yield rate. Calculate n. A 5 B 7 C 9 D 11 E 13
A 2-year maturity bond with face value of $1,000 makes annual coupon payments of $88 and is selling at face value. What will be the rate of return on the bond if its yield to maturity at the end of the year is: Note: Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places. a. 6% b. 8.8% c. 10.8% Rate of Return % % %
Consider a 30-year Bond with $1,000 face value, which offers 10% annual coupon, paid once a year.Assume that interest rates, hence YTM (Yield to Maturity) changed from 6% to 7%. What is the duration of the Bond in years? Enter your answer in the following format: 12.34Hint1: Answer is between 10.24 and 12.77Hint2: Duration = (new bond price - old bond price) * (-100) / old bond price
A $1,000 bond has a coupon of 8 percent and matures after eight years. Assume that the bond pays interest annually. What would be the bond's price if comparable debt yields 10 percent? Use Appendix B andAppendix D to answer the question. Round your answer to the nearest dollar. $ What would be the price if comparable debt yields 10 percent and the bond matures after four years? Use Appendix B and Appendix D to answer the question. Round your answer to the nearest dollar. $ Why are the prices different in a and b?The price of the bond in a is -Select-lessgreaterItem 3 than the price of the bond in b as the principal payment of the bond in a is -Select-further outcloserItem 4 than the principal payment of the bond in b (in time). What are the current yields and the yields to maturity in a and b? Round your answers to two decimal places. The bond matures after eight years: CY: %YTM: % The bond matures after four years: CY: %YTM: %
You are given the following information with respect to a non-callable bond: par amount: 1,000 • term to maturity: 4 years annual coupon rate: 8% payable annually. Time 0 1 2 3 1-Year Annual Forward Interest Rates Scenario X Scenario Y 7% 7% 8% 10% 7% 6% 7% 5% Each interest rate scenario has an equal probability of occurring. Calculate the value of the bond (i.e. the expected present value of the bond payments). A 1,000.00 B 1,018.40 C 1,022.80 D 1,030.39 E 1,031.07
A coupon bond that pays interest semi annually has a par value of $1000, matures in five years and has a YTM of 10%. The intrinsic value of the bond today is? If the coupon rate is 8%? Answer:
Suppose that the term structure of interest rates is: Interest rates are annual interest rates that are semi-annually compounded. Calculate the price and modified duration of a 1 -year bond with a 6% coupon rate, with coupons paid semi-annually. The bond has a face value of 100.0 Calculate the price and modified duration of a 2 -year bond with a 10% coupon rate, with coupons paid semi-annually. The bond has a face value of 100.0 Compare your results from 1 and 2 above. Which bond is more sensitive to changes in interest rates?

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