Consider a bond with a face value of $1,000 that sells for an initial price of $700. It will pay no coupons for the first nine years and will then pay 11% coupons for the remaining 29 years. Choose an equation showing the relationship between the price of the bond, the coupon (in dollars), and the yield to maturity. O A. B. O C. O D. 700 = 700 = 700= 700 = 110 110 + (1 + i)(1+i) ⁹+1 110 110 (1 + i) ⁹+1 (1+i) ⁹ +2 + 1,000 (1+i)29-9 +...+ 1,000 (1 + i) 9 +29 110 +...+ 19+29-1 (1 + i) ⁹ + + 110 (1 + i)9 + 29 − 1 110 (1 + i) ⁹ +2 + 110 9 +29 (1 + i) ⁹ + 2 + 1,000 (1+9+29

Consider a bond with a face value of $1,000 that sells for an initial price of $700. It will pay no coupons for the first nine years and will then pay 11% coupons for the remaining 29 years. Choose an equation showing the relationship between the price of the bond, the coupon (in dollars), and the yield to maturity. O A. B. O C. O D. 700 = 700 = 700= 700 = 110 110 + (1 + i)(1+i) ⁹+1 110 110 (1 + i) ⁹+1 (1+i) ⁹ +2 + 1,000 (1+i)29-9 +...+ 1,000 (1 + i) 9 +29 110 +...+ 19+29-1 (1 + i) ⁹ + + 110 (1 + i)9 + 29 − 1 110 (1 + i) ⁹ +2 + 110 9 +29 (1 + i) ⁹ + 2 + 1,000 (1+9+29

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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Suppose a ten-year, $1,000 bond with an 8.1% coupon rate and semiannual coupons is trading for $1,034.23.
Consider a bond with a coupon of 4.6 percent, five years to maturity, and a current price of $1,047.80. Suppose the yield on the bond suddenly increases by 2 percent. a. Use duration to estimate the new price of the bond. Note: Do not round intermediate calculations. Round your answer to 2 decimal places. Price b. Calculate the new bond price using the usual bond pricing formula. Note: Do not round intermediate calculations. Round your answer to 2 decimal places. Price
Consider a bond that has a life of 2 years and pays a coupon of 10% per annum (with semiannual payments); the yield is 5% per annum with semiannual compounding.(a) What is the bond’s price?(b) What is the bond’s duration?(c) Suppose that the bond price is the one you computed in part (a) and that the 6M, 12M, and 18M zero rates are respectively 4.2%, 4.8% and 5.6% per annum. What is the 2Y zero rate assuming all rates are quoted with semiannual compounding?
Consider two bonds x and y, both with face value 100, coupon rate 10%, and maturity of 1 year. Assume that the interest rate is 10%. Assume that bond y will go into default on both the principal and interest payments with a probability of 50%. Suppose that prices equal the expected discounted payments. What is the difference in the yields to maturity? (a) The yields to maturity are the same. (b) 110. (c) 120. (d) 10. (e) 12.
Consider a bond that has a price of $1046.76, a coupon rate of 8.8%, a yield to maturity of 8.1%, a face value of $1000, and 10 years to maturity. What is the current yield? Enter your answer as a percentage. Do not include the percentage sign in your answer. Enter your response below. Enter your answer to 2 DECIMAL PLACES. Number %
Consider the following bonds: •Bond A: A 2-year zero-coupon bond with a face value of $100 and 6% YTM. •Bond B: A 2-year par-value bond with a face value of $100 and 6% coupon rate. *Bond C: A 2-year par-value bond with a face value of $100 and 7% coupon rate. Suppose the yield curve shifts upwards by one percent. Which bond among bonds A, B, and C will experience the largest percentage price change? Which will have the lowest percentage price change? O a. Bond A; Bond C O b. Bond A; Bond B O c. Bond B; Bond C O d. Bond C; Bond B
A 30-year maturity bond making annual coupon payments with a coupon rate of 11.00% has a ation of 13.50 years. The bond currently sells at a yield to maturity of 5.75%. Ducation a. Find the exact dollar price of the bond if its yield to maturity falls to 4.75%. What is the % change in price? b. Assume that you need to make a quick approximation using the duration rule. What is the % change in price as approximated by the duration rule when the yield to maturity falls to 4.75%? c. Does the duration-rule provide a good approximation of the % price change in this case? Why or why not?
Consider a zero-coupon bond with a $1000 face value and 10 years left until maturity. Assuming that this bond trades for $1112, then the YTM for this bond is closest to: A) 8.0%. B) 3.4%. C) 6.8%. D) 9.2%.
Suppose a bond has a $1000 par value, 10 years to maturity, a 7 percent annual coupon, and sells for $985. What is its current yield? Select one: a.8.40 percent b.1.2 percent c.7.11 percent d.Answer is not available e.2.40 percent
1. Consider a real return bond with a face value of $15,000 and a coupon yield of 5.2%. What is the coupon payment after one year if the inflation rate is 6.8%? Select one: a) $817.44 b) $833.04 c) $825.24 d) $809.64 I
10) Suppose a coupon bond with 10 years remaining to maturity is reported to have a duration equal to 6.7 years. Assuming a current interest rate of 9% and an estimated decrease in the interest rate to 8.8%, calculate the estimated percentage increase in the bond's price. Hint: Duration= a) 3.3% b) 2.7% c) 1.2% d) 0.6% %AP Ai/(1+io)
Suppose a 10-year, $1,000 bond with a coupon rate of 8.7% and semiannual coupons is trading for $ 1,034.28 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 to 9.9% APRwhat will be the bond's price?

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