A bond of $1000 was issued five years ago at a coupon rate of 6%. The bond had a maturity period of 10 years to be redeemable at par. The market interest rate currently is 10%. a. Determine the value of the bond. b. Calculate the Modified Duration. c. Calculate the expected price change if tomorrow interest rates increases from 10% to 11.5% d. Calculate the expected price change if next year the interest rates will increase from 10% to 12%

A bond of $1000 was issued five years ago at a coupon rate of 6%. The bond had a maturity period of 10 years to be redeemable at par. The market interest rate currently is 10%. a. Determine the value of the bond. b. Calculate the Modified Duration. c. Calculate the expected price change if tomorrow interest rates increases from 10% to 11.5% d. Calculate the expected price change if next year the interest rates will increase from 10% to 12%

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 bond has a par value of $100, a coupon rate of 10.75% and matures in 5 years. If interest is paid annually and the required rate of return is 10%, what is the price of bond? Use excel.
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You purchase a KD 3000 face value bond with 5 years remaining in its maturity period. The bond has current yield of 15% and its payment are KD 45 made every month. If compounding is annually, calculate the following: 1. The purchase value of the bond. 2. The yield to maturity. (Show trial and error with interpolation)
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:
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A bond that matures in 12 years has a $ 1000 par value. The annual coupon interest rate is 12 percent and the market's required yield to maturity on a comparable-risk bond is 16 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?
A bond has just been issued. The bond has an annual coupon rate of 7% and coupons are paid annually. The bond has a face value of $1,000 and will mature in 7 years. The bond’s yield to maturity is 9%. Calculate the actual change in the bond’s price as the yield to maturity changes from 9% to 11%. Use the bond’s duration to calculate the approximate bond price change as the yield to maturity changes from 9% to 11%.
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