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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Suppose a 10-year, $1,000 bond with a coupon rate of 8.8% and semiannual coupons is trading for $1,034.19. 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% APR, what will be the bond's price? a. What is the bond's yield to maturity (expressed as an APR with semiannual compounding)? The bond's yield to maturity is ☐ %. (Round to two decimal places.)
Suppose a seven-year, $1,000 bond with a coupon rate of 7.8% and semiannual coupons is trading with a yield to maturity of 6.34%. 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 7.34% (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.) OA. Because the yield to maturity is greater than the coupon rate, the bond is trading at a premium. O B. OC. Because the yield to maturity is less than the coupon rate, the bond is trading at a discount. Because the yield to maturity is greater than the coupon rate, the bond is trading at par. O D. Because the yield to maturity is less than the coupon rate, the bond is trading at a premium.
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Suppose you are given the following information about the default-free, coupon-paying yield curve: Maturity (years) Coupon rate (annual payment) YTM 1 0.00% 2.587% a. Use arbitrage to determine the yield to maturity of a two-year zero-coupon bond. b. What is the zero-coupon yield curve for years 1 through 4? Note: Assume annual compounding. 2 11.00% 4.008% a. Use arbitrage to determine the yield to maturity of a two-year zero-coupon bond. The yield to maturity of a two-year, zero-coupon bond is %. (Round to two decimal places.) b. What is the zero-coupon yield curve for years 1 through 4? The yield to maturity for the three-year and four-year zero-coupon bond is found in the same manner as the two-year zero-coupon bond. The yield to maturity on the three-year, zero-coupon bond is %. (Round to two decimal places.) The yield to maturity on the four-year, zero-coupon bond is %. (Round to two decimal places.) Which graph best depicts the yield curve of the zero-coupon bonds? (Select the…
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