consider a $100000 dollar zero coupon bond with a 6% coupon rate paid annually next year the current yield is 9% what is the DV01 measure of the interest rate risk
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- Suppose a 10-year, 10% semiannual coupon bond with a par value of 1,000 is currently selling for 1,135.90, producing a nominal yield to maturity of 8%. However, the bond can be called after 5 years for a price of 1,050. (1) What is the bonds nominal yield to call (YTC)? (2) If you bought this bond, do you think you would be more likely to earn the YTM or the YTC? Why?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 IUse the following information to answer the questions. Bond A Bond B Face Value 1000 1000 Coupon rate 10% 8% Coupons paid out Semi-annually Quarterly Years to maturity 4 4 Bond price 800 ? Suppose bond A and B have the same YTM. What is the yield to maturity of bond A? What is the price of bond B? What is the current yield of bond B? What is the EAR (effective annual rate) of these two bonds?
- A one-year zero coupon bond costs $99.43 today. Exactly one year from today, it will pay $100. What is the annual yield-to-maturity of the bond? (1.e., what is the discount rate one needs to use to get the price of the bond given the future cash flow of $100 in one year?) 1.0057 0.0057 2.0057 -0.00576Example: Suppose that a bond has a face value of P100,000and its maturity date is 10 years from now. The coupon rate is5% payable semi-annually. Find the fair price of this bond, assuming that the annual market rate is 4%. Given: Coupon rate r= 5%, payable semi - annually Face Value = 100.000 Time to maturity = 10 years Number of periods = 2|10) = 20 Market rate = 4% The bondholder receives 20 payments of P2,500 each, and P100,000 at t- 10. Present Value of 100,000: F 100000 = 67,556.42 1+ jm -1+0.0410 Present Value of 20 payments of Php2500 each: Convert 4% to equivalent semi-annual rate: 1 = (1+)"-1= (1+) - I = 0.0404 Direction: Answer the following just like the given example above. 1. Suppose that a bond has a face value of P220, 000 and its maturity date is 6 years from now. The coupon rate is 5% payable semi-annually. Find the fair price of this bond, assuming that the annual market rate is 8%. 2. Suppose that a bond has a face value of P50, 000 and its maturity date is 5 years…
- Example: Suppose that a bond has a face value of P100,000and its maturity date is 10 years from now. The coupon rate is5% payable semi-annually. Find the fair price of this bond, assuming that the annual market rate is 4%. Given: Coupon rate r= 5%, payable semi - annually Face Value = 100,000 Time to maturity = 10 years Number of periods = 2(10) = 20 Market rate = 4% The bondholder receives 20 payments of P2,500 each, and P100,000 at t = 10. Present Value of 100,000: F P =- 100000 = 67,556.42 1+ 0.0410 Present Value of 20 payments of Php2500 each: Convert 4% to equivalent semi-annual rate: 1+ jm 0.04 1= (1+=)" -1 - (1+ ) - 1 - 1 = m 2 | = 0.0404Suppose the term structure of risk-free interest rates is as shown below: 5 yr 7 yr 10 yr 20 yr Term 1 уг 2 yr 3 yr 3.24 3.79 4.09 5.05 2.07 2.46 2.71 Rate (EAR %) a. Calculate the present value of an investment that pays $1,000 in two years and $3,000 in five years for certain. b. Calculate the present value of receiving $100 per year, with certainty, at the end of the next five years. To find the rates for the missing years in the table, linearly interpolate between the years for which you do know the rates. (For example, the rate in year 4 would be the average rate in year 3 and year 5.) c. Calculate the present value of receiving $1,800 per year, with certainty, for the next 20 years. Infer rates for the missing years using linear interpolation. (Hint: Use a spreadsheet.)Given the following information, calculate the expected yield and promised yield of a bond with a maturity of one year. Assume coupons are paid annually. Face value = £100 Price = £90 Recovery rate = 41% Annual coupon rate = 9% Probability of default = 10% a. Promised yield 0.2111 expected yield 0.1356 b. Promised yield 0.2111 expected yield 0.1280 c. Promised yield 0.1889 expected yield 0.1156 d. Promised yield 0.1889 expected yield 0.1082 e. None of the above
- If a $5,000 zero coupon bond with a 10-year maturity has a market price of $1,508.30, what is its rate of return?EXPECTATIONS THEORY Assume that the real risk-free rate is 2% and that the risk premium is zero. If a 1-year Treasury bond yield is 5% and a 2-year Treasury bond yields 7%, what is the 1-year interest rate that is expected for Year 2? Calculate this yield using a geometric average. What inflation rate is expected during Year 2? Comment on why the average interest rate during the 2-year period differs from the 1-year interest rate expected for Year 2. 6-15 maturity5 Year Treasury Notes are currently yielding 6.00%, and you have found the following interest premium that relate to this investment: • Inflation premium 1.75% • Liquidity premium 0.00% • Default risk premium 0.00% • Maturity risk premium 1.50% Given the above information, what is the real risk-free rate of return?
