Consider a five-year, default-free bond with annual coupons of 5% and a face value of $1,000 and assume zero-coupon yields on default-free securitiesare as summarized in the following table:Maturity1 year2 years3 years4 years5 yearsZero-Coupon Yields4.00%4.30%4.50%4.70%4.80%a. What is the yield to maturity on this bond?b. If the yield to maturity on this bond increased to 5.20%, what would the new price be?a. What is the yield to maturity on this bond?yield to maturity on this bond is%. (Round toree decimal places.)

Face value (F) = $1000 Annual coupon (C) = 5% of $1000 = $50 n = 5 years Let r = YTM

Consider a five-year, default-free bond with annual coupons of 5% and a face value of $1,000 and assume zero-coupon yields on default-free securities are as summarized in the following table: Maturity Zero-Coupon Yields 1 year 2 years 3 years 4 years 5 years 4.00% 4.30% 4.50% 4.70% 4.80% a. What is the yield to maturity on this bond? b. If the yield to maturity on this bond increased to 5.20%, what would the new price be? a. What is the yield to maturity on this bond? The yield to maturity on this bond is %. (Round to three decimal places.)

Consider a five-year, default-free bond with annual coupons of 5% and a face value of $1,000 and assume zero-coupon yields on default-free securities are as summarized in the following table: Maturity Zero-Coupon Yields 1 year 2 years 3 years 4 years 5 years 4.00% 4.30% 4.50% 4.70% 4.80% a. What is the yield to maturity on this bond? b. If the yield to maturity on this bond increased to 5.20%, what would the new price be? a. What is the yield to maturity on this bond? The yield to maturity on this bond is %. (Round to three decimal places.)

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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Consider a coupon bond that has a par value of $1,000 and a coupon rate of 8%. The bond is currently selling for $1,008.98 and has 2 years to maturity. What is the bond's yield to maturity (YTM)? The yield to maturity is
There are three bonds that mature at the same time, have the same par value, and are expected to pay their first annual coupon 1 next year. The bonds are detailed in the below table. Bond A B с PV PV PV Present Value B ? ? ? PV B If ca r, then what can we say about the prices of the bonds today? (Enter >, <, or ?) PV C PV Yield to Maturity C r rb Coupon Rate ca с с
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Suppose a seven-year, $1,000 bond with a 7.9% coupon rate and semiannual coupons is trading with a yield to maturity of 6.71%. a. Is this bond currently trading at a discount, at par, or at a premium? Explain. b. If the yield to maturity of the bond rises to 7.28% (APR with semiannual compounding), what price will the bond trade for? a. Is this bond currently trading at a discount, at par, or at a premium? Explain. (Select the best choice below.) A. Because the yield to maturity is less than the coupon rate, the bond is trading at a discount. B. Because the yield to maturity is less than the coupon rate, the bond is trading at a premium. C. Because the yield to maturity is greater than the coupon rate, the bond is trading at a premium. D. Because the yield to maturity is greater than the coupon rate, the bond is trading at par. b. If the yield to maturity of the bond rises to 7.28% (APR with semiannual compounding), what price will the bond trade for? The new price of the bond is $…
← Suppose a seven-year, $1,000 bond with an 8.4% coupon rate and semiannual coupons is trading with a yield to maturity of 6.65%. a. Is this bond currently trading at a discount, at par, or at a premium? Explain. b. If the yield to maturity of the bond rises to 7.05% (APR with semiannual compounding), what price will the bond trade for? a. Is this bond currently trading at a discount, at par, or at a premium? Explain. (Select the best choice below.) O A. Because the yield to maturity is less than the coupon rate, the bond is trading at a premium. B. Because the yield to maturity is greater than the coupon rate, the bond is trading at par. OC. Because the yield to maturity is greater than the coupon rate, the bond is trading at a premium. D. Because the yield to maturity is less than the coupon rate, the bond is trading at a discount.
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Consider the zero coupon Treasury bond yield curve. Suppose a 1 year bond has a yield of 2.13%. The yield curve slopes downwards between maturities of 1 year and 3 years, and then slopes upwards. Which of the following must be true? Group of answer choices A) The yield of a zero coupon bond with maturity 5 years is higher than 2.13%. B) A 1 year positive coupon bond must have a lower price than the zero coupon bond with the same maturity. C) Bond purchasers believe the Fed will decrease rates in the short run, and then increase them in the long run. D) The economy will be in a recession within 2 years. E) C and D.
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