An investor will pay $2318.63 for an n-year $2,000 par bond with a coupon rate of 10% compounded semiannually or he will pay $2531.05 for an n-year $2,000 par bond with a coupon rate of 11% compounded semiannually. Assuming that the investor gets the same yield on the two bonds, find this yield rate expressed as a nominal rate convertible two times per year. Also find n.

An investor will pay $2318.63 for an n-year $2,000 par bond with a coupon rate of 10% compounded semiannually or he will pay $2531.05 for an n-year $2,000 par bond with a coupon rate of 11% compounded semiannually. Assuming that the investor gets the same yield on the two bonds, find this yield rate expressed as a nominal rate convertible two times per year. Also find n.

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 5-year bond with a yield of 4% (continuously compounded), with a face value of $100, pays an 3% coupon at the end of each year. What is the bond’s price? (You can use your calculations for the next questions) A 5-year bond with a yield of 4% (continuously compounded) pays an 3% coupon at the end of each year. What is the bond’s duration? Use the calculations from the previous problem to make it easier, and you can use your duration answer for the following question.
You have a bond with the following features: - Semi-annual coupon payments. - Coupon rate 7.60%. - Face value $1,000. - 3.5 years to maturity. - Current market price $1,130. Requirements (A, B, and C are independent): 1. Calculate the duration and modified duration for this bond. Duration ___ Mduration ___ 2. Now, let’s assume the modified duration of this bond is 3 years. If the yield increases by 30 bps (basis points), what will the new price of the bond using modified duration? 3. If the yield drops by 75 bps, what is the actual new price of the bond?
Consider a 5 year non-call 3 year bond that is callable in 3 year and 4 year at prices of 101 and 100. It pays an annual coupon of 4% and is priced at 101. What is the yield-to-worst for this bond?
you are considering the purchase of a semiannual bond with a 9% coupon rate, it is trading at $875 and matures at $ 1000 in 25 years. What is the coupon payment on this bond?.
A bond that matures in 7.5 years and pays semi-annual payments of 20.1 is priced at 98.70. What is the coupon rate if the face value is, as always, 1,000? ( well explain all point of question with proper answer).
assume that forward rates for the next 2 years are given by: r(0.5)=6%, r(1)=7%; r(1.5)=8% and r(2)=9%. In addition, the price of a 7% coupon bond maturing 2.5 years from now is equal to $101 and the price of a 6% coupon bond maturing 3 years from now is equal to $99 a) Find the 2.5-year forward rate r(2.5). Keep at least 6 decimal digits while doing calculations and reporting the answer. b) Find the 3 year forward rate r(3). Keep at least 6 decimal digits while doing calculations and reporting the answer.
You have the choice between a convertible bond and a non-convertible bond for investment. Both offer you a coupon rate of 2.5% per year with semi-annual compounding. The remaining maturity for both bonds is 7.5 years. The price for the non-convertible bond is 99.7. Would you pay more or less for the convertible bond? Why?
A n-year annual coupons bond with coupon rate r per year. The yield rate is 0.10. Calculate the Macaulay duration of the bond for all four possible combinations of parameters: • n = 10 or 30 • r = 0.05 or 0.15

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