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 $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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