Assume that a bond will make payments every six months as shown on the following timeline (using six- month periods): Period Cash Flows a. What is the maturity of the bond (in years)? b. What is the coupon rate (as a percentage)? c. What is the face value? $19.36 2 $19.36 *** a. What is the maturity of the bond (in years. The maturity is years. (Round to the nearest integer.) 19 $19.36 20 $19.36 + $1,000

Assume that a bond will make payments every six months as shown on the following timeline (using six- month periods): Period Cash Flows a. What is the maturity of the bond (in years)? b. What is the coupon rate (as a percentage)? c. What is the face value? $19.36 2 $19.36 *** a. What is the maturity of the bond (in years. The maturity is years. (Round to the nearest integer.) 19 $19.36 20 $19.36 + $1,000

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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Consider the following bonds: (Click on the following icon in order to copy its contents into a spreadsheet.) Coupon Rate (annual payments) Maturity (years) 13 0% 0% 12 2% 13 8% 12 Bond A B C D a. What is the percentage change in the price of each bond if its yield to maturity falls from 8% to 7%? b. Which of the bonds A through D is the most sensitive to a 1% drop in interest rates from 8% to 7% and why? Which bond is the least sensitive? Provide an intuitive explanation for your answer. Note: Assume annual compounding. a. What is the percentage change in the price of each bond if its yield to maturity falls from 8% to 7%? The percentage change in bond A is 5.47%. (Round to two decimal places.)
Consider a bond with a duration of 8 years having a yield to maturity of 8 percent, and interest rates are expected to rise by 50 basis points. What is the percentage change in the price of the bond? a. 3.85 percent b. -4.02 percent c. 3.45 percent d. -3.45 percent e. -3.85 percent
Yield to maturity The bond shown in the following table pays interest annually. (Click on the icon here in order to copy the contents of the data table below into a spreadsheet.) Par value $100 Coupon interest rate 14% Years to maturity 4 Current value $100 a. Calculate the yield to maturity (YTM) for the bond. b. What relationship exists between the coupon interest rate and yield to maturity and the par value and market value of a bond? Explain. a. The yield to maturity (YTM) for the bond is%. (Round to two decimal places.)
The following is a list of prices for zero-coupon bonds of various maturities. Maturity (years) Price of Bond 1 $ 953.40 2 903.47 3 852.62 4 787.66 Required: Calculate the yield to maturity for a bond with a maturity of (i) one year; (ii) two years; (iii) three years; (iv) four years. Assume annual coupon payments. Calculate the forward rate for (i) the second year; (ii) the third year; (iii) the fourth year. Assume annual coupon payments.
The following table summarizes the prices of various default-free zero-coupon bonds (expressed as a percentage of the face value): a. Compute the yield to maturity for each bond. b. Plot the zero-coupon yield curve (for the first five years). c. Is the yield curve upward sloping, downward sloping, or flat?
еВook Problem Walk-Through Last year Carson Industries issued a 10-year, 13% semiannual coupon bond at its par value of $1,000. Currently, the bond can be called in 6 years at a price of $1,065 and it sells for $1,200. a. What are the bond's nominal yield to maturity and its nominal yield to call? Do not round intermediate calculations. Round your answers to two decimal places. YTM: % YTC: % Would an investor be more likely to earn the YTM or the YTC? -Select- -Select- ent yield and to Table 7.1) Round your answer to two decimal places. b. Since the YTM is above the YTC, the bond is likely to be called. Since the YTC is above the YTM, the bond is likely to be called. Since the YTM is above the YTC, the bond is not likely to be called. Since the YTC is above the YTM, the bond is not likely to be called. Since the coupon rate on the bond has declined, the bond is not likely to be called. I. If the bond is called, the capital gains yield will remain the same but the current yield will be…
The following is a list of prices for zero-coupon bonds of various maturities. a. Calculate the yield to maturity for a bond with a maturity of (i) one year; (ii) two years; (iii) three years; (iv) four years. Assume annual coupon payments. (Do not round intermediate calculations. Round your answers to 2 decimal places.) Maturity (Years) 1 2 3 4 Maturity (years) 1 2 3 4 Maturity (Years) 2 3 4 $ $ $ $ b. Calculate the forward rate for (i) the second year; (ii) the third year; (iii) the fourth year. Assume annual coupon payments. (Do not round intermediate calculations. Round your answers to 2 decimal places.) $ $ $ Price of Bond 983.40 918.47 867.62 774.16 Price of Bond $983.40 918.47 867.62 774.16 Price of Bond YTM 918.47 867.62 774.16 % % % % Forward Rate % % % #
Assume the following: Bond A coupon = 6%, maturity = 5 years, yield to maturity = 6% Bond B coupon = 0%, maturity = 5 years, yield to maturity = 6% Bond C coupon = 6%, maturity = 5 years, yield to maturity = 6.5% Which of the following statements concerning duration is correct? Group of answer choices A. Duration of C<Duration of A=Duration of B. B. Duration of A>Duration of B>Duration of C. C. Duration of C < Duration of A < Duration of B. D. Duration of A< Duration of B<Duration of C.
1. Consider the following bond that pays coupon interest semi-annually. Coupon Yield to maturity Maturity (Years) Par Value Bond 8% 6% 2 $100 a) What is the price value of a basis point? Assuming one basis point decrease. b) Compute the Macaulay duration theoretically. What is the modified duration? c) Compute the approximate duration by increasing yield by 20 basis points and compare your answers with those calculated in part (b). d) Compute the convexity measure theoretically. e) When the yield increases by 20 basis points, what is the new bond price? What is the estimated bond price using duration calculated in part (b)? What is the estimated bond price using duration calculated in part (b) together with the convexity calculated in part (d)?
The following table gives the prices of Treasury bonds: Bond Principal ($) Time to maturity (years) Annual Coupon* ($) Bond Price ($) 100 0.50 100 1.00 100 1.50 100 2.00 0.0 0.0 6.2 8.0 98 95 101 104 A. Calculate zero rates for maturities of 6 months, 12 months, 18 months, and 24 months. B. What are the forward rates for the periods: 6 months to 12 months, 12 months to 18 months, 18 months to 24 months? C. What are the 6-month, 12-month, 18-month, and 24-month par yields for bonds that provide semiannual coupon payments? D. Estimate the price and yield of a two-year bond providing a semiannual coupon of 7% per annum. PLEASE SHOW EXCEL WORK
The bond's duration is the sum of the present value of each payment weighted by the time period in which the payment is received, with the resulting quantity divided by the price of the bond. Therefore, solve for the bond's duration given the following variables: A $1,000 par bond is priced at 95% of par, the bond's annual coupon rate is 6%, and the bond has 4 years to maturity. Additionally, show your calculator's function keys for the 5th column titled, "What is the Present Value Interest Factor at ? %" PV =, FV =, PMT =,N=, and I = .... and CPT key = ? 0.0000 CUIT CPT SET ENTER DEL INS Column 1 Column 2 Column 3 Column 4 Column 5 2ND CF NPV IRR PM AMORT DON CLR TVM PV PMT FV RAND Number (#) of "X" means "multiplied each by" payment Amount of payment "A $1,000 par bond is priced "X" means "multiplied by" What is the Present Value Interest 呢 VE 1/x HYP SIN مر at 95% of par" so $950 x .06 = $57?) 1 X $ 57 X Factor at ? % ? (show calculator function keys: PV=, FV = PMT =, N =, & I=? ? =…
The following is a list of prices for zero-coupon bonds of various maturities. Maturity (years) 1 2 3 4 Price of Bond $ 980.90 914.97 843.12 771.76 Required: a. Calculate the yield to maturity for a bond with a maturity of (i) one year; (ii) two years; (iii) three years; (iv) four years. Assume annual coupon payments. b. Calculate the forward rate for (i) the second year; (ii) the third year; (iii) the fourth year. Assume annual coupon payments. Complete this question by entering your answers in the tabs below. Required A Required B Calculate the yield to maturity for a bond with a maturity of (i) one year; (ii) two years; (iii) three years; (iv) four years. Assume annual coupon payments. Note: Do not round intermediate calculations. Round your answers to 2 decimal places. Maturity (Years) Price of Bond YTM 1 $ 980.90 % 2 $ 914.97 % 3 $ 843.12 %

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