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 6.30% 3 7.30% 7.70% 5 8.00% 6.90% What is the price of a three-year, default-free security with a face value of $1,000 and an annual coupon rate of 8%? 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 8%? The price is $1894.57. (Round to the nearest cent.)

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 6.30% 3 7.30% 7.70% 5 8.00% 6.90% What is the price of a three-year, default-free security with a face value of $1,000 and an annual coupon rate of 8%? 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 8%? The price is $1894.57. (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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Using the expectations hypothesis theory for the term structure of interest rates, determine the expected return for securities with maturities of two, three, and four years based on the following data. (Input your answers as a percent rounded to 2 decimal places.) 1-year T-bill at beginning of year 1 1-year T-bill at beginning of year 2 1-year T-bill at beginning of year 3 1-year T-bill at beginning of year 4 2-year security 3-year security 4-year security Expected Return Interest Rate 58 78 10% 128
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…
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.)
Using the expectations hypothesis theory for the term structure of interest rates, determine the expected return for securities with maturities of two, three, and four years based on the following data. Note: Input your answers as a percent rounded to 2 decimal places. 1-year T-bill at beginning of year 1 1-year T-bill at beginning of year 21 1-year T-bill at beginning of year 3 1-year T-bill at beginning of year 4 2-year security 3-year security 4-year security Expected Return % % % Interest Rate 7% 9% 10% 12%
You observe that one, two, and three-year maturity, default-free, zero-coupon bonds have YTM of 7%, 7.8%, and 7.5%, respectively. Based on the expectations theory, what is the implied one-year forward rate, two years from today? ⒸA. 8.62% OB 6.90% OC.8.12% O 0.7.39%
Derive the probability distribution of the 1-year HPR on a 30-year U.S. Treasury bond with a 4.0% coupon if it is currently selling at par and the probability distribution of its yield to maturity a year from now is as shown in the table below. (Assume the entire 4.0% coupon is paid at the end of the year rather than every 6 months. Assume a par value of $100.) Note: Leave no cells blank - be certain to enter "0" wherever required. Negative values should be indicated by a minus sign. Do not round intermediate calculations. Round your answers to 2 decimal places. Economy Boom Normal Growth Recession Probability 0.25 0.50 0.25 YTM 10.0 % $ 9.0 % 8.0 % Capital Gain 43.44 $ (56.56) Price $ Coupon Interest 4.00 HPR (52.56) % % %
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?
You observe the following yield curve for Treasury securities: Maturity Yield 1 Year 4.80% 2 Years 6.00% 3 Years 6.70% 4 Years 7.20% 5 Years 7.90% Assume that the pure expectations hypothesis holds. What does the market expect will be the yield on 4-year securities, 1 year from today? O 8.68% O 8.18% 6.68% 7.68% O 7.18%
Assume the zero-coupon yields on default-free securities are as summarized in the following table: 3 years 4 years 5 years Maturity 1 year 2 years 7.00% 7.30% 6.20% 6.50% 6.70% Zero-Coupon Yields What is the maturity of a default-free security with annual coupon payments and a yield to maturity of 6.20%? Why? What is the maturity of a default-free security with annual coupon payments and a yield to maturity of 6.20%? (Select the best choice below.) O A. One year В. Тwo years C. Three years D. Four years E. Five years
The yield curve for default-free zero-coupon bonds is currently as follows: Maturity (years) YTM 1 9.8% 2 10.8 3 11.8 Required: a. What are the implied one-year forward rates? (Do not round intermediate calculations. Round your answers to 2 decimal places.) Maturity (years) YTM Forward rate 1 9.8% 2 3 10.8% 11.8% % % b. Assume that the pure expectations hypothesis of the term structure is correct. If market expectations are accurate, what will the pure yield curve (that is, the yields to maturity on one- and two-year zero-coupon bonds) be next year? O There will be a shift upwards in next year's curve. O There will be a shift downwards in next year's curve. O There will be no change in next year's curve. c. What will be the yield to maturity on two-year zeros? (Do not round intermediate calculations. Round your answers to 2 decimal places.) YTM % d. If you purchase a two-year zero-coupon bond now, what is the expected total rate of return over the next year? (Hint: Compute the current…

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