sa.3 Both Bond A and Bond B have 8.6 percent coupons and are priced at par value. Bond A has 8 years to maturity, while Bond B has 18years to maturity.a. If interest rates suddenly rise by 1.2 percent, what is the percentage change in price of Bond A and Bond B?Note: A negative value should be indicated by a minus sign. Do not round intermediate calculations. Enter your answers as apercent rounded to 2 decimal places.Bond ABond B%A in Price%%b. If interest rates suddenly fall by 1.2 percent instead, what would be the percentage change in price of Bond A and Bond B?Note: Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places.%A in PriceBond ABond B%%

To calculate the percentage change in price of bonds A and B given a change in interest rates, we…

Answered: Both Bond A and Bond B have 8.6 percent…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Bond J has a coupon of 6.4 percent. Bond K has a coupon of 10.4 percent. Both bonds have 20 years to maturity and have a YTM of 7.8 percent. a. If interest rates suddenly rise by 1.2 percent, what is the percentage price change of these bonds? Note: A negative value should be indicated by a minus sign. Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places. Bond J Bond K %A in Price % % b. If interest rates suddenly fall by 1.2 percent, what is the percentage price change of these bonds? Note: Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places. %A in Price Bond J % Bond K %
Suppose that you buy a 1-year maturity bond with a coupon of 7% paid annually. If you buy the bond at its face value, what real rate of return will you earn if the inflation rate is 4%? 6%? 8%? (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places. Negative amount should be indicated by a minus sign.)
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Assume that the risk free rate is equal to 0.04. The corporate bond rate for a risky bond is 0.11. Assume a recovery rate of 0.33. All rates in this problem are stated as decimals. Using the precise calculation formula, calculate λ , the probability of default. Round your answer to three decimal places, and state as a decimal. Please answer fast i give you upvote.
Please correct answer and don't used hand raiting
Check my work mode: This shows what is correct or incorrect for the work you have completed so far. It does not indicate com What is the Macaulay duration of a bond with a coupon of 5.4 percent, nine years to maturity, and a current price of $1,055.40? What is the modified duration? Note: Do not round intermediate calculations. Round your answers to 3 decimal places. Answer is complete but not entirely correct. Macaulay Modified Duration 7.410 x Years 7.082 Years
Suppose the current interest rate on a one-year bond is 2% and the current interest rate on a two-year bond is 4%. The term premium on a two-year bond is 1%. According to the expectations hypothesis, what interest rate should we expect on a one-year bond next year? Answer as a percentage to one decimal place and do not include symbols (e.g. $, %, commas) in your answer. Answer:
None
Bond J has a coupon rate of 4.2 percent. Bond K has a coupon rate of 14.2 percent. Both bonds have ten years to maturity, a par value of $1,000, and a YTM of 9.4 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 9.40 % % Bond K 12.83 %
Consider the following. a. What is the duration of a two-year bond that pays an annual coupon of 12 percent and whose current yield to maturity is 14 percent? Use $1,000 as the face value. (Do not round intermediate calculations. Round your answer to 3 decimal places. (e.g., 32.161)) b. What is the expected change in the price of the bond if interest rates are expected to decrease by 0.4 percent? (Negative amount should be indicated by a minus sign. Do not round intermediate calculations. Round your answer to 2 decimal places. (e.g., 32.16)) Answer is complete but not entirely correct. a. Duration of bond 1.899 b. Expected change in the price $ 7.32x
Suppose we observe the following rates: 1R₁ = 0.95%, 1R2 = 1.45%, and E(2r1) = 0.927%. If the liquidity premium theory of the term structure of interest rates holds, what is the liquidity premium for year 2, L2 ? Note: Do not round intermediate calculations. Round your percentage answer to 3 decimal places (i.e., 0.12345 should be entered as 12.345). Liquidity premium %
Suppose the average return on FTSE TMX Canada long-term bonds is 7.00% and the standard deviation is 9.00% and the average return and standard deviation on T-bills are 3.30% and 2.50%, respectively. Further assume that the returns are normally distributed. Use the NORMDIST function in Excel® to answer the following questions. (Do not round intermediate calculations. Round the final answers to 2 decimal places.) a. What is the probability that in any given year, the return on long-term corporate bonds will be greater than 9% ? Less than 0% ? Greater than 9% Less than 0% % % b. What is the probability that in any given year, the return on T-bills will be greater than 9%? Less than 0%? Greater than 9% Less than 0% % % c-1. In 1981, the return on FTSE TMX Canada long-term bonds was -4.29%. How likely is it that such a low return will recur at some point in the future? Probability % c-2. T-bills had a return of 9.00% in this same year. How likely is it that such a high return on IT-bills…

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