Assume that a bond will make payments every six months as shown on the following timeline (using six-month periods): Period 1 2 29 30 Cash Flows $20.37 $20.37 $20.37 $20.37 + $1,000 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?

Assume that a bond will make payments every six months as shown on the following timeline (using six-month periods): Period 1 2 29 30 Cash Flows $20.37 $20.37 $20.37 $20.37 + $1,000 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?

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 government bond has face value of OR 200 and a coupon rate of 6% paid semiannually. Assume that the interest rate is equal to 8% per year. What is the bond’s price? What is the reason for the difference in price on an annual and semiannually basis? Discuss the role of financial managers.
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.)
Suppose the face value of a bond which matures in seven years is $5,000, and pays a coupon of $75. Suppose the bond was purchased at a price of $2,000, and the price is estimated to be constant the entire time until maturity. What will be the rate of return on the bond? 40% 4% .0375% 3.75%
Suppose that the term structure of interest rates is: t 0.5 1 1.5 2 r 1% 1.2% 1.4% 1.8% Interest rates are annual interest rates that are semi-annually compounded. 1. Calculate the price and modified duration of a 1-year bond with a 6% coupon rate, with coupons paid semi-annually. The bond has a face value of 100.0 2. Calculate the price and modified duration of a 2-year bond with a 10% coupon rate, with coupons paid semi-annually. The bond has a face value of 100.0 3. Compare your results from 1 and 2 above. Which bond is more sensitive to changes in interest rates?
A 9-year bond has a yield of 13.5% and a duration of 8.63 years. If the MARKET yield changes by 60 basis points, what is the percentage change in the bond’s price? Is this an increase or decrease? A 9-year bond has a yield of 13.5% and a duration of 8.63 years. If the BOND'S yield changes by 60 basis points, what is the percentage change in the bond’s price? Is this an increase or decrease? ( Explain well both question with proper step by step Answer) .
Consider the following term structure of interest rates: Maturity Interest Rate 1-year 4.6% 2-year 5.3% 3-year 6.9% Compute the implied one-year forward rate at the beginning of year 3.
Suppose that the current 6-month, 1-year, 1.5-year and 2-year interest rates are 2.2%,3%, 3.5% and 3.75%, respectively. a) Calculate the prices of a 1-year and 2-year Treasury bonds. In each case, assumethe face value of £100 and the coupon rate of 5% per annum and that coupons arepaid semi-annually. Assume continuous compounding. Compare the obtainedresults. Are they consistent with your expectations? b) Calculate the par yield on the 1-year bond with semi-annual coupons
Consider a bond with a modified duration (in years) of 3.2. Coupon rate and yield to maturity are the same. Par value is $1,000. estimate the price of the bond for a 200 basis-point increase in interest rates.
The following table gives the prices of Treasury bonds: Bond Principal ($) 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
Consider a bond with maturity 2 year, 100 face value, coupon 3.60%, and yield 7.20%. Compute a dollar duration numerically using a dy =0.001%, Report you result with two digits decimal accuracy and the correct sign. Example:-185.95 Blank Excel Worksheet Your Answer: Answer
Consider the following two Treasury securities: Bond Price Modified duration (years) A $100 6 B $80 7 For a 25 basis-point change in interest rates, which bond has the greatest percentage change in price? A. Bond A B. Bond B C. Can't be determined
Bond Durations: (A) Compute the duration and modified duration of a 7-year bond that makes annual payments with a coupon rate of 10% and a YTM of 9%. (B) If interest rates FALL by 100 basis points, what is the dollar and percentage change in price? (C) If interest rates RISE by 100 basis points, what is the dollar and percentage change in price?

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