Bond P is a premium bond with a coupon rate of 8.9 percent. Bọnd D is a discount bond with a coupon rate of 4.9 percent. Both bonds make annual payments, have a YTM of 6.9 percent, have a par value of $1,000, and have fourteen years to maturity. a. What is the current yield for Bond P? For Bond D? (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 remain unchanged, what is the expected capital gains yield over the next year for Bond P? For Bond D? (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.) Bond P Bond D Current yield a. % b. Capital gains yield

Bond P is a premium bond with a coupon rate of 8.9 percent. Bọnd D is a discount bond with a coupon rate of 4.9 percent. Both bonds make annual payments, have a YTM of 6.9 percent, have a par value of $1,000, and have fourteen years to maturity. a. What is the current yield for Bond P? For Bond D? (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 remain unchanged, what is the expected capital gains yield over the next year for Bond P? For Bond D? (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.) Bond P Bond D Current yield a. % b. Capital gains yield

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 Treasury bond that settles on October 18, 2022, matures on March 30, 2041. The coupon rate is 6.10 percent, and the bond has a yield to maturity of 5.57 percent. What are the Macaulay duration and modified duration? Note: Use the duration functions in Excel to solve the problem. Do not round intermediate calculations. Round your answers to 4 decimal places. Answer is complete but not entirely correct. Macaulay duration 11.4179 Modified duration 10.8154 X
A 30-year maturity bond making annual coupon payments with a coupon rate of 14.5% has duration of 10.64 years. The bond currently sells at a yield to maturity of 9%. Required: a. Find the price of the bond if its yield to maturity falls to 8%. (Do not round intermediate calculations. Round your answer to 2 decimal places.) Price of the bond b. What price would be predicted by the duration rule, if its yield to maturity falls to 8% ? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Predicted price
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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You have purchased a bond for $973.02. The bond has a coupon rate of 6.4%, pays interest annually, has a face value of $1,000, 4 years to maturity, and a yield to maturity of 7.2%. You expect that interest rates will fall by .3% later today. a) Calculate the bond’s macauly duration b) Use the modified duration to find the approximate percentage change in the bond's price. Find the new price of the bond from this calculation. c) Suggest how the estimate in part (b) can be improved.

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