Calculate the price of a zero-coupon bond with a face value of $2,000 that matures in 8 years if the market interest rate is 7% with semi-annual compounding. (Round the answer to 2 decimal places.) a. $1,124.89 b. $1,089.42 c. $1,056.73 d. $1,145.26

1. A two-year bond with $1,000 face-value and 10% coupon rate is sold for $1,000 today (Year 1).  If one year later (Year 2) the market interest rate decreases by 5%, then this bond will have a market price of $ ____ (round UP the nearest integer) next year (Year 2). 2. Using the one-period valuation model, assuming a year-end dividend of $11.00, an expected sales price of $110, and a required rate of return of 10%, the current price of the stock would be $ ________. 3. Last year you purchased a bond with an interest rate of 5 percent.  Now the interest rate on the bond market drops to 4%.  Then People can use a lower price to buy your bond today. (True or False)

Suppose that the prices of zero-coupon bonds with various maturities are given in the following table. The face value of each bond is $1,000. Maturity (Years) 1 2 3 4 5 Price $983.78 865.89 797.92 732.00 660.24 Required: a. Calculate the forward rate of interest for each year. b. How could you construct a 1-year forward loan beginning in year 3? c. How could you construct a 1-year forward loan beginning in year 4?

Suppose that the prices of zero-coupon bonds with various maturities are given in the following table. The face value of each bond is $1,000. Maturity (Years) 1 2 3 4 5 Required: a. Calculate the forward rate of interest for each year. b. How could you construct a 1-year forward loan beginning in year 3? c. How could you construct a 1-year forward loan beginning in year 4? Required A Price $940.93 Complete this question by entering your answers in the tabs below. 868.39 800.92 735.40 670.48 Required B Maturity (years) 2 3 Calculate the forward rate of interest for each year. Note: Round your answers to 2 decimal places. Required C Forward Rate % % Prov 12 of 12 Next

3. Suppose that you observe the following two bonds being traded, both of which pay coupons annually and have a $100 face value: Bond Coupon Maturity Rate A B 6% 2% 30 years 30 years Price $147.13 $64.47 If the Law of One Price holds, what is the price of a 30-year Annuity that pays $8 per year starting at t = 1?

1. A three-year bond with a $1,000 face-value and 10% coupon rate is sold for $1,000 today (Year 1).  If one year later (Year 2) the market interest rate decreases by 5%, then this bond will have a market price of $ ____ (round UP to the nearest integer) next year (Year 2).   2. True or False? The current interest rate on a 10-year coupon bond with face value = $1,000 and annual coupon rate = 3.25% is2.42%.  This implies the buyer of the bond will receive a $24.2 payment from the bond issuer every year before maturity while holding the bond.   3. A three-year bond with $1,000 face-value and 10% coupon rate is sold for $1,000 today (YEAR 1).  If one year later (Year 2) the market interest rate increases by 5%, then this bond will have a market price of $ ________ (round UP to the nearest integer) then (Year 2).

Consider an inverse floating rate coupon bond with 1 year remaining to maturity. On maturity, bondholders are expected to receive $100 face value. Coupons are paid quarterly and the current 3-mth LIBOR observed rate is 5.234% p.a. The annual coupon rate is specified as: Annual coupon rate = 20% p.a. – 30 where Cis the annual 3-mth LIBOR rate. Assume, for simplicity, that the annual 3-mth LIBOR rate will never exceed 6.67% p.a. (so that the annual coupon rate defined above is always a positive number). The following table shows the current LIBOR continuously compounded rate with different maturities: Maturity LIBOR Maturity LIBOR 5.0% р.а. 5.1% р.а. 5.2% р.а. 5.3% p.a. 5.3% p,a. 5.4% p.a. 5.5% p.a. 5.5% р.a. 5.6% p.a. 5.7% р.a. 5.8% p.a. 1 7 2 8 3 4 10 11 6 12 5.9% p.a For example, the 1-mth LIBOR is 5.0% p.a. compounded continuously. You can treat the LIBOR rates presented in table above as the discount rates/spot rates with different maturities. Required: What is the current price of…

Consider a 10000 par value, 8-year bond bearing a 2.5% annual coupon rate. Coupons pay out every year, starting one year after the bond is purchased. The bond is purchased for P to yield an annual effective rate of i. Assuming the bond redeems at par value, it is known that the book - value of the bond immediately after the 3 coupon is paid is equal to 9247.42. Find P. Give your answer rounded to the nearest whole number (i.e. X).

Suppose a 10 -year,$1,000bond with a(n)9%coupon rate and semiannual coupons is trading for a price of$946.34. 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 to9%APR, what will the bond's price be?

Suppose that you buy a two-year 8.9% bond at its face value.   a-1. What will be your total nominal return over the two years if inflation is 3.9% in the first year and 5.9% in the second? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)           a-2. What will be your total real return? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)           b. Now suppose that the bond is a TIPS. What will be your total 2-year real and nominal returns? (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places.)