An investor wants to find the duration of a(n) 15-year, 5% semiannual pay, noncallable bond that's currently priced in the market at $518.23, to yield 12%. Using a 150 basis point change in yield, find the effective duration of this bond (Hint. use Equation 11.11).The new price of the bond if the market interest rate decreases by 150 basis points (or 1.5%) is $(Round to the nearest cent.)→ To calculate the price of a bond with semiannual compounding, use the following formula:Bond price (with semi-annual compounding)Present value of an annuityof semiannual coupon paymentsBP₁ =C/2+=C/2C/22N++$1,0002NPresent value of thebond's par valuewhere C/2 = the amount of interest paid every six months, 2N = total number of six-month periods until the bond matures, and r/2= the required rate of return per 6-month period.

The problem requires the calculation of bond price with the given level of coupon rate and discount…

An investor wants to find the duration of a(n) 15-year, 5% semiannual pay, noncallable bond that's currently priced in the market at $518.23, to yield 12%. Using a 150 basis point change in yield, find the effective duration of this bond (Hint: use Equation 11.11). The new price of the bond if the market interest rate decreases by 150 basis points (or 1.5%) is $ (Round to the nearest cent.)

An investor wants to find the duration of a(n) 15-year, 5% semiannual pay, noncallable bond that's currently priced in the market at $518.23, to yield 12%. Using a 150 basis point change in yield, find the effective duration of this bond (Hint: use Equation 11.11). The new price of the bond if the market interest rate decreases by 150 basis points (or 1.5%) is $ (Round to the nearest cent.)

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 10-year bond pays an annual coupon, its YTM is 10%, and it currently trades at a par value. Which of the following statement is correct? Select one: a. The bond's coupon rate is less than 10%. b. Th bond's coupon rate is equal to 10%. c. If the yield to maturity increases, then the bond's price will increase. d. The bond's current yield is less than 10%.
QWE wishes to issue a perpetual callable bond that pays 7.4% annual coupon. The current interest rate is 7.4%. Next year, the interest rate will be 3.3% or 8.9% with equal probability. The bond is callable at $1,050, and it will be called if the interest rate drops to 3.3%. What is the issue price of this callable bond?
Consider a bond with semiannual interest payments that has a Settlement Date of 8/15/2020, a Maturity Date of 2/15/2031, a Coupon Rate of 5.00%, a Market Price of $975, a Face Value of $1,000, and a Required Return of 5.35%. What is the Macaulay Duration using the Duration function on these bonds expressed as a decimal calculated to two decimal places if you purchase them at the current market price? For example, if your answer is 12.345 then enter as 12.35 in the answer
Consider a bond with a coupon of 4.6 percent, five years to maturity, and a current price of $1,047.80. Suppose the yield on the bond suddenly increases by 2 percent. a. Use duration to estimate the new price of the bond. Note: Do not round intermediate calculations. Round your answer to 2 decimal places. Price b. Calculate the new bond price using the usual bond pricing formula. Note: Do not round intermediate calculations. Round your answer to 2 decimal places. Price
Consider a bond that has a life of 2 years and pays a coupon of 10% per annum (with semiannual payments); the yield is 5% per annum with semiannual compounding.(a) What is the bond’s price?(b) What is the bond’s duration?(c) Suppose that the bond price is the one you computed in part (a) and that the 6M, 12M, and 18M zero rates are respectively 4.2%, 4.8% and 5.6% per annum. What is the 2Y zero rate assuming all rates are quoted with semiannual compounding?
Please answer the following question: The modified duration and convexity of a 6%, 25 year bond selling toyield 9% is 10.62 and 91.46 respectively. If the required yield increasesby 300 basis points from 9% to 12% what is the approximate percentagechange in the price of the bond due toa) duration,b) convexity,c) duration and convexity?d) If the actual change is -26.50%, compare your results from a) and c)which provides a better approximation?
Your broker offers to sell you a CleenWtr Bond for $1150. The bond has a coupon rate of 3%, semiannual interest payments, and a maturity of 9 years. If the interest rate on comparable debt is 2.0% is your broker fairly pricing the bond? (What is the curent price of the bond)
An investor wants to find the duration of a(n) 10-year, 6% semiannual pay, noncallable bond that's currently priced in the market at $541.25, to yield 15%. Using a 250 basis point change in yield, find the effective duration of this bond (Hint: use Equation 11.11). The new price of the bond if the market interest rate decreases by 250 basis points (or 2.5%) is $ (Round to the nearest cent.)
Suppose the interest rate on a 1-year T-bond is 2.60% and that on a 2-year T-bond is 4.50%. Assume that the pure expectations theory is NOT valid, and the MRP is zero for a 1-year T-bond but 0.30% for a 2-year bond. What is the equilibrium market forecast for 1-year rates 1 year from now? a. 4.7333% b. 5.1110% c. 5.2676% d. 5.5463% e. 5.8250%. Only typing answer Please explain step by step
Assume that you are considering the purchase of a 5-year, noncallable bond with an annual coupon rate of 8.00%. The bond has a face value of $1000, and it makes semiannual interest payments. If you require an 11.55% yield to maturity on this investment, what is the maximum price you should be willing to pay for the bond? Round your answer to two decimal places. For example, if your answer is $345.6671 round as 345.67 and if your answer is .05718 or 5.7182% round as 5.72.
A 30-year maturity bond making annual coupon payments with a coupon rate of 14.0% has duration of 11.36 years and convexity of 186.4. The bond currently sells at a yield to maturity of 8%. a. Find the price of the bond if Its yield to maturity falls to 7%. (Do not round Intermediate calculations. Round your answer to 2 decimal places.) Price of the bond b. What price would be predicted by the duration rule? (Do not round Intermediate calculations. Round your answer to 2 decimal places.) Predicted price c. What price would be predicted by the duration-with-convexity rule? (Do not round Intermediate calculations. Round your answ to 2 decimal places.) Predicted price
You have a bond with a modified duration of 14 years currently. The convexity of the bond is 169. In the event that the bond's yield changes from 8.6% to 10%, what will be the approximate percentage change in the bond's price? Enter your answer as a decimal number or with the percentage sign.

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