Assume the zero-coupon yields on default-free securities are as summarized in the following table: 2 years Maturity Zero-Coupon Yields 1 year 3 years 4 years 5 years 6.90% 7.30% 7.60% 8.00% 8.40% What is the price of a three-year, default-free security with a face value of $1,000 and an annual coupon rate of 7%? What is the yield to maturity for this bond? What is the price of a three-year, default-free security with a face value of $1,000 and an annual coupon rate of 7%? The price is $ |: (Round to the nearest cent.)

Assume the zero-coupon yields on default-free securities are as summarized in the following table: 2 years Maturity Zero-Coupon Yields 1 year 3 years 4 years 5 years 6.90% 7.30% 7.60% 8.00% 8.40% What is the price of a three-year, default-free security with a face value of $1,000 and an annual coupon rate of 7%? What is the yield to maturity for this bond? What is the price of a three-year, default-free security with a face value of $1,000 and an annual coupon rate of 7%? The price 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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Suppose a seven-year, $1,000 bond with a 7.7% coupon rate and semiannual coupons is trading with a yield to maturity of 6.51%. a. Is this bond currently trading at a discount, at par, or at a premium? Explain. b. If the yield to maturity of the bond rises to 7.38% (APR with semiannual compounding), what price will the bond trade for? a. Is this bond currently trading at a discount, at par, or at a premium? Explain. (Select the best choice below.) OA. Because the yield to maturity is less than the coupon rate, the bond is trading at a premium. B. Because the yield to maturity is greater than the coupon rate, the bond is trading at a premium. C. Because the yield to maturity is less than the coupon rate, the bond is trading at a discount. OD. Because the yield to maturity is greater than the coupon rate, the bond is trading at par.
Suppose a seven-year, $1,000 bond with a 7.97% coupon rate and semiannual coupons is trading with a yield to maturity of 5.53%. a. Is this bond currently trading at a discount, at par, or at a premuim? Explain. b. If the yield to maturity of the bond rises to 6.09% (APR with semiannual compounding), at what price will the bond trade?
Suppose you observe the following zero - coupon bond prices per $1 of maturity payment: 0.96154 (1-year), 0.91573 (2-year), 0.87630(3-year), 0.82270 (4- year), 0.77611 (5-year). What is the par coupon rate for the 4-year bond? Question 3 options: 3.999834% 4.488965% 4.492350 % 4.957679 % 5.144082%
Suppose you are given the following information about the default-free, coupon-paying yield curve: Maturity (years) 1 Coupon rate (annual payments) 0.00 YTM 2.000% 2 10.00 3.908% Show your work in Excel Solution. 3 6.00 5.840% 4 12.00 5.783% a. Use arbitrage to determine the yield to maturity of a two-year, zero- coupon bond. b. What is the zero-coupon yield curve for years 1 through 4?
B.) The Hull-White model is considering the short rate movement follow the lognormal distribution. 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 1.0000 0.0000 0.0000 1.0000 A 10-year bond issued today at par with an A rating is assumed to bear a coupon rate of 7%. If a bond is issued today at par with a B rating and with a recovery percentage of 50%, what should be its coupon rate so that its expected return will also be 7%? Choose the closest answer A) 2.5% B) 5% C) 7.5% D) 9% E) 11%
6.
The following table summarizes prices of various default-free zero-coupon bonds ( $100 face value): Maturity (years) 1 2 3 4 5 {:[" Price (per "$100],[" face value) "]:} $96.33 $91.98 $87.41 $82.53 $77.41 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? Note: Assume annual compounding. a. Compute the yield to maturity for each bond. The yield on the 1-year bond is %. (Round to two decimal places.) The yield on the 2-year bond is %. (Round to two decimal places.) The yield on the 3-year bond is %. (Round to two decimal places.) The yield on the 4-year bond is enter your response here%. (Round to two decimal places.) Part 5 The yield on the 5-year bond is enter your response here%. (Round to two decimal places.) Note:- Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism. Answer completely. You will…
Suppose a ten-year, $1,000 bond with an 8.5% coupon rate and semiannual coupons is trading for $1,035.43. a. What is the bond's yield to maturity (expressed as an APR with semiannual compounding)? b. If the bond's yield to maturity changes to 9.8% APR, what will be the bond's price?
Assume the zero-coupon yields on default-free securities are as summarized in the following table: (Click on the following icon in order to copy its contents into a spreadsheet.) Maturity (years) Zero-coupon YTM 1 6.70% 2 7.10% 3 7.30% 4 7.70% 5 8.00% What is the price of a three-year, default-free security with a face value of $1,000 and an annual coupon rate of 5%? What is the yield to maturity for this bond? What is the price of a three-year, default-free security with a face value of $1,000 and an annual coupon rate of 5%? The price is $ (Round to the nearest cent.)
Assume the zero-coupon yields on default-free securities are as summarized in the following table: Maturity 1 year 2 years 3 years 4 years 5 years Zero-Coupon Yields 4.0% 4.3% 4.5% 4.7% 4.8% What is the price today of a two-year, default-free security with a face value of $1,000 and an annual coupon rate of 6%? Does this bond trade at adiscount, at par, or at a premium? What is the price today of a two-year, default-free security with a face value of $1,000 and an annual coupon rate of 6%? The price is $_____. (Round to the nearest cent.)
Suppose a 10-year, $1000 bond with a coupon rate of 8.4% and semiannual coupons is trading for $1035.64. a. What is the bond's yield to maturity (expressed as an APR with semiannual compounding)? b. If the bond's yield to maturity changes to 9.4% APR, what will be the bond's price?
The term structure for zero-coupon bonds is currently: Maturity (Years) YTM (%) 1 5.2% 2 6.2 3 7.2 Next year at this time, you expect it to be: Maturity (Years) YTM (%) 1 6.2% 2 7.2 3 8.2 Required: What do you expect the rate of return to be over the coming year on a 3-year zero-coupon bond? Under the expectations theory, what yields to maturity does the market expect to observe on 1- and 2-year zeros at the end of the year? Is the market's expectation of the return on the 3-year bond greater or less than yours?

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