Consider a 15 year 6.5% semi-annual coupon bond whose duration is approx. 9.50 years when required rate of return (yield to maturity) is 7.58%. Prove that this bond is immunized if you hold it for 9.50 years.
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![6. Consider a 15 year 6.5% semi-annual
coupon bond whose duration is approx.
9.50 years when required rate of return
(yield to maturity) is 7.58%. Prove that
this bond is immunized if you hold it for
9.50 years.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F38336ba8-c25e-4577-ac30-cca3a7f9bed6%2F6b76179e-13df-4279-a5d8-c23313757823%2Fzm3ydw_processed.jpeg&w=3840&q=75)
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- According to the expectations theory, what will be the interest rate on a three-year bond if the two-year term permum is 1.0% while the three year term premium is 2.0%, and a one-year bond has an interest rate of 4% and is expected in have an interest rate of 5% next year and 6% in two year ? Select one: A. 5.0% B. 15.0% C. 4.09 D. 6.0%According to the expectations theory, what will be the interest rate on a three-year bond if the two-year term premium is 1.0% while the three- year term premium is 2.0%, and a one-year bond has an interest rate of 4% and is expected to have an interest rate of 5% next year and 6% in two year? Select one: O a. 5.0% O b. 15.0% O c. 4.0% O d. 6.0%A one-year bond currently pays 6% interest. It's expected that it will pay 11.0% next year and 10% the following year. The two-year term premium is 0.4% while the three-year term premium is 0.7%. What is the interest rate on a three-year bond according to the liquidity premium theory? Select one: a. 10.1% b. 9.70A O c.9.0% O d. 9.40%
- A $5,000 face value strip bond has 12 years remaining until maturity. If the market rate of return is 4.00% compounded semiannually, what is the fair market value of the bond? Your Answer: Answer5. A bond promises to pay the bondholder equal payments of P6,000 in six-month intervals for 30 years. If the face amount is P450,000, what is the fair price of the bond? Assume that the market rate is 2% compounded annually.Assume that a bond makes 30 equal annual payments of \$1,000$1,000 starting one year from today. (This security is sometimes referred to as an amortizing bond.) If the discount rate is 3.5\%3.5% per annum, what is the current price of the bond?
- A $1,000, 9.50% semiannual bond is purchasedfor $1,010. If the bond is sold after three years andsix interest payments, what should the selling pricebe to yield a 10% return on the investment?Suppose the current YTM on a 5-year T-Bond is 2.8% and the current YTM for a 1-year T-Bond is 0.75%. What is the 5-year term premium if the expected 1-year rates for thenext 4 years are 1.25%, 1.75%, 2.5%, and 3.25%?Q.2:A 16% callable bond, having 19 years to maturity has a market price of $1400. What value you would place on this bond if the market required return is 18%. If the bond is called after 11 years and a call premium is paid, which is equal to the next 3 year's advance coupon payment (as mentioned in the indenture), should this bond be purchased or not? Give reasons to justify your answer.
- 7. Consider a 20 year 7.20% annual coupon bond whose duration is approx. 11 years when required rate of return (yield to maturity) is 7.50%. Prove that this bond is immunized if you hold it for 11 years. 8. Consider a 10 year 6.50% annual coupon bond whose duration is 7.50 years when required rate of return (yield to maturity) is 6.50%. Prove that this bond is immunized if you hold it for 7.50 years.Consider a 12%, 15 year bond that pays interest semiannually, and its current price is $675. What is the promise yield to maturity?a bond pays P340 interest per year and has a face value of P8,328 at the end of 9 years, when it has to be redeemed. If the interest of the bond is 0.19. What is the current value of the bond?
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