Bond J has a coupon rate of 6 percent. Bond K has a coupon rate of 11 percent. Both bonds have 8 years to maturity, make semiannual payments, and have a YTM of 9 percent. If interest rates suddenly rise by 4 percent, what is the percentage price change of Bond J? O-20.85% O-18.85% O-19.85% O-20.83% If interest rates suddenly rise by 4 percent, what is the percentage price change of Bond K? 28.14% O-16.88% O-18.88% O-18.86%

Bond J has a coupon rate of 6 percent. Bond K has a coupon rate of 11 percent. Both bonds have 8 years to maturity, make semiannual payments, and have a YTM of 9 percent. If interest rates suddenly rise by 4 percent, what is the percentage price change of Bond J? O-20.85% O-18.85% O-19.85% O-20.83% If interest rates suddenly rise by 4 percent, what is the percentage price change of Bond K? 28.14% O-16.88% O-18.88% O-18.86%

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 1-year corporate bond will pay the following: 1. The promised amount of $10,000, with probability 70%. 2. only $9,000 with probability 29%; and 3. nothing with probability 1% 1) If the risk-free market interest rate is 5%, what minimum promised interest rate must the lender demand just to break even , 2) Then, what would be the default premium on this bond under a risk-neutral world. 3) If the bond, however, has a promised rate of return of 11%, what is the risk premium on this bond under a risk-averse world
Question What is meant by LIBOR and LIBID. Which is higher? The 6-month and 1-year zero rates are both 10% per annum. For a bond that has a life of 18 months and pays a coupon of 8% per annum (with semiannual payments and one having just been made), the yield is 10.4% per annum. What is the bond’s price? What is the 18-month zero rate? All rates are quoted with semiannual compounding.
K← Consider the case of a two-year discount bond-that is, a bond that pays no coupon and pays its face value after two years rather than one year. Suppose the face value of the bond is $1,000, and the price is $850. What is the bond's yield to maturity? The bond's yield to maturity is%. (Round your response to two decimal places.)
Consider two zero coupon bonds. Both have face values of $1 comma 0001,000. Bond A pays its face value in 33 years, and Bond B pays its face in 1414 years. If interest rates change from 88% to 4.54.5%, what is the percentage change in the long maturity bond's price minus the percentage change in the short maturity bond's price? The percentage change in the long maturity bond's price minus the percentage change in the short maturity bond's price is nothingm%. _______(Round to two decimal places.)
An investor wants to find the duration of a(n) 10-year, 6% semiannual pay, noncallable bond that's currently priced in the market at $541.25, to yield 15%. Using a 250 basis point change in yield, find the effective duration of this bond (Hint: use Equation 11.11). The new price of the bond if the market interest rate decreases by 250 basis points (or 2.5%) is $ (Round to the nearest cent.)
Suppose the interest rate on a 1-year T-bond is 2.60% and that on a 2-year T-bond is 4.50%. Assume that the pure expectations theory is NOT valid, and the MRP is zero for a 1-year T-bond but 0.30% for a 2-year bond. What is the equilibrium market forecast for 1-year rates 1 year from now? a. 4.7333% b. 5.1110% c. 5.2676% d. 5.5463% e. 5.8250%. Only typing answer Please explain step by step
Consider two zero coupon bonds. Both have face values of $100. Bond A pays its face value in 8 years, and Bond B pays its face in 2 years. If interest rates change from 9% to 7%, what is the percentage change in the long maturity bond's price minus the percentage change in the short maturity bond's price?
Consider a semi-annual bond that has a par value of 100, a 15-year maturity, a 5% coupon rate. Monthly interest rate is 0.412%. Q) Suppose that the bond’s yield to maturity decreases to 3.5%. How much will the bond price increase by applying the duration rule?
Bond J is a 7 percent coupon bond. Bond K is a 13 percent coupon bond. Both bonds have 12 years to maturity, make semiannual payments, and have a YTM of 10 percent. If interest rates suddenly rise by 2 percent, what is the percentage price change of these bonds? What if rates suddenly fall by 2 percent instead? Please answer fast i give you upvote.
A 20-year bond has a coupon rate of 8 percent, and another bond of the same maturity has a coupon rate of 15 percent. If the bonds are alike in all other respects, which will have the greater relative market price decline if interest rates increase sharply? Why?
Bond J has a coupon rate of 5 percent. Bond K has a coupon rate of 15 percent. Both bonds have eight years to maturity, a par value of $1,000, and a YTM of 11 percent, and both make semiannual payments. a. If interest rates suddenly rise by 2 percent, what is the percentage change in the price of these bonds? Note: A negative answer should be indicated by a minus sign. Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16. b. If interest rates suddenly fall by 2 percent instead, what is the percentage change in the price of these bonds? Note: Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16. a. Percentage change in price b. Percentage change in price Bond J % % Bond K % %
Bond A makes semi-annual interest payments of $30. Bond B makes an annual payment of $50. All else equal, which one has the lower coupon rate? Select one: a. B b. A=B c. A

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