A bond's credit rating provides a guide to its price. In December 2020, Aaa bonds yielded 5.4%, and Baabonds yielded 6.4%. Some bad news causes a 10% five-year bond to be unexpectedly downrated fromAaa to Baa. Assume face value is $1,000.Note: Do not round intermediate calculations. Round your answers to 2 decimal places.a. What is the bond's price if it is rated as Aaa?b. What is the bond's price if it is rated as Baa?a. Bond priceb. Bond price$1,782.931,591.01

Aaa Bond Yield = ra = 5.4%Bbb Bond Yield = rb = 6.4%Coupon rate = 10%Time = t = 5 yearsFace Value =…

Answered: A bond's credit rating provides a guide…

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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What is the bond equivalent yield on a $1 million T-bill that currently sells at 96.9 percent of its face value and is 344 days from maturity? (Do not round intermediate calculations. Round your answers to 3 decimal places. (e.g., 32.161))
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The Wall Street Journal reports that the current rate on 5-year Treasury bonds is 1.85 percent and on 10-year Treasury bonds is 3.35 percent. Assume that the maturity risk premium is zero. Calculate the expected rate on a 5-year Treasury bond purchased five years from today, Egrs). (Do not round intermediate calculations. Round your answer to 2 decimal places.) Expected rate- my work
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An investor purchased the following five bonds. Each bond had a par value of $1,000 and a 8% yield to maturity on the purchase day. Immediately after the investor purchased them, interest rates fell, and each then had a new YTM of 7%. What is the percentage change in price for each bond after the decline in interest rates? Fill in the following table. Enter all amounts as positive numbers. Do not round intermediate calculations. Round your monetary answers to the nearest cent and percentage answers to two decimal places. Please see image I am not sure if this counts as one question but it is one in the book.
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please answer all three parts within 30 minutes. make sure you answer all three parts. else negative rating for sure.

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