An insurance company must make payments to a customer of $10 million in one year and $4 million in five years. The yield curve is flat at 10%. a. If it wants to fully fund and immunize its obligation to this customer with a single issue of a zero-coupon bond, what maturity bond must it purchase? (Do not round intermediate calculations. Round your answer to 4 decimal places.) Maturity of zero coupon bond _____Years b. What must be the face value and market value of that zero-coupon bond? (Do not round intermediate calculations. Enter your answers in millions rounded to 2 decimal places.) Face Value_____ Millions $ Market Value______ Millions $

Q: What is the price of the bond?

A: The value of the bond is calculated by discounting the present value of its coupon payments by the…

Q: Bond J has a coupon rate of 5 percent and Bond K has a coupon rate of 11 percent. Both bonds have 14…

A: A bond refers to an instrument the issuing organization uses to raise debt capital from…

Q: Suppose that there is a bank that is offering to lend and/or borrow money at an interest rate of 8%…

A: Price of Bond/Gold mine = Present Value of Future Cash Flows

Q: Use the table below for the questions that follow, and assume semi-annual interest payments. Bond A…

A: Duration of bond is the weighted period of the bond that is required to receive all cash flow from…

Q: There is a two-year zero-coupon bond with a face value of $100. Suppose that there is a bank that is…

A: A bond is an instrument that provides debt capital to the issuer from its investors. It differs from…

Q: Bond A is priced at par with a duration of 6.5 years and yielding 4%. Bond B is priced at 99, has a…

A: Bonds are financial instruments in which an investor loans money to a firm or government for a…

Q: Give typing answer with explanation and conclusion Consider two Bonds with $1,000 face value:…

A: Face Value = 1000 Coupon Rate = 10% YTM = 4% or 5% No. of years = 30

Q: need answer in step by step

A: The answer is in the explanation.Explanation:Given:- Face value ( F ) = $1,000- Coupon rate = 11%-…

Q: What is the Macaulay duration of a 3% bond with 3 years to maturity, discounted at a rate of 2% per…

A: Macaulay duration shows the time period required by investor to recover his invested amount in the…

Q: PLEASE DO NOT PROVIDE AN EXCEL SOLUTION a. 5% 5-year bond is available in the market at Rs. 950.…

A: YTM and YTC are financial terms related to bonds. YTM is the annualized return anticipated on a bond…

Q: You will be paying $9,500 a year in tuition expenses at the end of the next two years. Bonds…

A: ABCDECalculation1Time012total2cash flow$9,500$9,500$19,0003present…

Q: Consider the following coupon bond issued by XYZ.inc Term: 3 years Payment: 75 Face Value: 1,000…

A: Given information : Time period = 3 years Periodic payments = 75 Face value = 1000 Risk free rate =…

Q: You will be paying $8,600 a year in tuition expenses at the end of the next two years. Bonds…

A: Here,AnnualObligation is $8,600Yield is 7%Time Period is 2 years

Q: A newly issued 10-year maturity, 6% coupon bond making annual coupon payments is sold to the public…

A: Question 1:Constant yield price = $803.62 Question 2:Investors taxable income= $…

Q: 4-12. Based on a desired nominal rate of return (yield) of 6%, a bond is purchased for $5,000. The…

A: Given Information: Yield = 6% Bond Purchase Price = $5,000 Interest Rate = 12%

Q: A two-year bond pays a coupon rate of 10 percent and has a face value of $1,000. (In other words,…

A: Answer  YTM = {interes + (maturity value- current price )/n}/(maturity value- current price )/2

Q: Find the duration of a 4.0% coupon bond making semiannually coupon payments if it has three years…

A:

Q: Consider the following $1,000 par value zero-coupon bonds: Years until Yield to Maturity Maturity…

A: A zero-coupon bond, also known as a discount bond, is a type of fixed-income security that does not…

Q: 9. The face value of a bond is $3000.00. The firm offering the bond pays 1% of the sales price to…

A: Hi, Thanks for posting the questions. As per our Q&A guidelines, the first question should be…

Q: You hold an annual coupon bond for 1 year, receiving the 0.14 coupon before selling. When bought it…

A: Holding period return refers to the return earned from the asset or bond fort he period the asset or…

Q: A bond is issued with a coupon of 4% paid annually, a maturity of 39 years, and a yield to maturity…

A: The rate of return refers to the premium amount as a percentage of the invested amount. The premium…

Q: a. Find the duration of a 8% coupon bond making annual coupon payments if it has three years until…

A: Bond Duration is that minimum duration under which investor will received his invested amount amount…

Q: Please provide explanation without direct answers

A: Given information : Time period (years) = 1 Payment = 125 Face value = 1,500 Risk free rate = 1%…

Q: An insurance firm needs to make a payment of $10000 in 3 years, the market interest rate to discount…

A: Note: This post has multiple questions. The first three questions have been answered below.

Q: Both Bond Bill and Bond Ted have 11 percent coupons, make semiannual payments, and are priced at par…

A: The relationship between bond price and yield is inverse. As the yield on a bond increases, the…

Q: An insurance company must make payments to a customer of $20 million in 1 year and $8 million in 5…

A: Zero-coupon bond Bonds that are issued at less than par and that pay no interest to bondholders are…

Q: Bond J has a coupon rate of 3 percent. Bond K has a coupon rate of 9 percent. Both bonds have 18…

A: A bond is a fixed-income security that offers the investor a fixed set of coupon throughout the…

Q: a. What is the inflation premium? b. What is the fair interest rate on Moore Corporation 30-year…

A: A bond is a debt security issued by many large corporations and governments to borrow funds for a…

Q: A company's bond has a coupon rate of 9.00% and has 19 years remaining until maturity. The company's…

A: Bond is a debt security that is issued by organizations to raise debt funds from public and…

Q: Consider a 6%, 15-year, semi-annual payment bond with a par value of $1000. Compute the current…

A: First we need to calculate bond price by using equation below. Bond price will the sum of present…

Q: An insurance company is analyzing the following three bonds, each with five years to maturity,…

A: In general, lower coupon bonds have a higher duration than a similar higher coupon bond. This is…

Q: A Bank offers both loans and deposits at a nominal  interest rate of 4% that is continuously…

A: Interest rate (i): 4% with continuous compoundingMaturity of bond: 3yearsFace value: £10,000Annual…

Q: Consider two bonds, S and T. Both bonds presently are selling at their par value of $100. Bond S…

A: Solution:Yield to maturity refers to the rate of return earned by the bond holder on per annum…

Q: A newly issued 10-year maturity, 5% coupon bond making annual coupon payments is sold to the public…

A:

Q: What is the tex-equivalent interest rate needed if you purchase a municipal bond wiht a face value…

A: Municipal bonds are bonds issued by state or local governments. They are generally tax exempt.

Q: You will be paying $12,200 a year in tuition expenses at the end of the next two years. Bonds…

A: Given: Particulars Amount Tuition expenses $12,200 Year 2 Yield 9% Yield 10% Yield 8%

Q: A 1-year corporate bond will pay the following: 1. The promised amount of $10,000, with probability…

A: Default Premium:The default premium is the additional return that investors demand to compensate for…

Q: What is meant by LIBOR and LIBID. Which is higher?

A: “Hi There, Thanks for posting the questions. As per our Q&A guidelines, must be answered only…

Q: uppose that 6 months after you purchase the bond, the market rate for interest on this type of bond…

A: Bond valuation according to financial management is done by discounting all the expected future cash…

Q: Consider a financial institution whose asset and liability both consist of coupon bonds only. The…

A: a) Market values: Asset: Price = FV / (1 + yield/2)^(number of coupon payments) = 100 / (1 +…

Q: A company must make a payment of $2500 in 5 years. Four-year zero coupon bonds and seven-year zero…

A: As per reddington immunisation conditions, Average duration of assets = average duration of…

Q: Bond J has a coupon rate of 5 percent. Bond K has a coupon rate of 15 percent. Both bonds have eight…

A: The price of the bond refers to the present value of the bond when calculated with the yield market…

Q: semi-annual interest payments of $30.  Bond B makes an annual payment of $50.  All else equal, which…

A: Bond is investment by bond holder calculate price of bond , we consider the interest payment done .…

Bond Valuation

Bond valuation are the notes issued by the corporation to raise long-term funds for the business. The corporations are required to pay the interest on such liabilities at a specified rate of interest (termed as coupon rate) at specified dates which may be on semi-annual or annual basis. These interest payments may be in the form of coupons.