Consider the following three bonds (see Table 1), which all have a par value of $100 and pay coupons semiannually if the coupon rate is not zero. What is the 6.5-year spot rate on a BEY basis? Bond Coupon Rate Price Maturity(yrs) A 106 3 6 75 B 0 6 115 C 4 6.5
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- 2. Consider a 15-year semiannual floating rate bond with coupon rate determined with the following formula: Coupon rate = reference rate + 65bps What’s the discount margin of the bond if the bond price is 99.5730 and current reference rate is 9%?Consider a bond with semiannual interest payments that has a Settlement Date of 8/15/2020, a Maturity Date of 2/15/2031, a Coupon Rate of 5.00%, a Market Price of $975, a Face Value of $1,000, and a Required Return of 5.35%. What is the Macaulay Duration using the Duration function on these bonds expressed as a decimal calculated to two decimal places if you purchase them at the current market price? For example, if your answer is 12.345 then enter as 12.35 in the answerThe one-year spot rate z1 = 5% and the forward price for a one-year zero-coupon bond beginning in one year is 0.9346. Find the spot price (zero price) of a two-year zero-coupon bond.
- Suppose you observe the following zero - coupon bond prices per $1 of maturity payment: 0.96154 (1-year), 0.91573 (2-year), 0.87630(3-year), 0.82270 (4- year), 0.77611 (5-year). What is the par coupon rate for the 4-year bond? Question 3 options: 3.999834% 4.488965% 4.492350 % 4.957679 % 5.144082%Consider the following pure discount bonds with face value $1,000: Maturity Price 1 952.38 2 898.47 3 847.62 4 799.64 5 754.38 a). Find the spot rates and draw a yield curve.b). Assume that there is a constant liquidty premium that is equal to 1% across all maturities. Find the forward rates and the expected one period future interest rates.The Expectations theory suggests that under certain conditions all bonds outstanding, especially Treasury bonds, must have identical total returns over a 1-year holding period, independently of their final maturity. suppose that today’s interest rate on a 2-year default free zero-coupon Treasury bond that pays $100 at maturity (0i0,2) is 6%. What is today’s price of such a bond (that is, what would you pay to purchase such a bond)?
- What is the reat risk free rate on these financial accounting question?The current price of a 1-year $1000 zero-coupon bond is $943.40. Suppose the one-year forward rate in year 1 is f₁ = 6.8% and the one-year forward rate in year 2 is f₂ = 7.5%. Compute the price of a 2-year $1000 zero-coupon bond and a 3-year $1000 zero-coupon bond using these forward rates and the implied spot rate from the 1-year bond.Vhat is the yield of each of the following bonds, if interest (coupon) is paid semiannually? 6% 20 8.02 % 5800.00 d of the following bond if interest (coupon) is 1 Data Table - X Years to Coupon Rate Matunty 12% 10 (Click on the following icon n in order to copy its contents into a spreadsheet.) eld of the following bond if interest (coupon) is Par Value $1,000.00 Yield to Maturity Matunty Doupon Rale 6% Price $800.00 $1,000.00 S3.110.00 $1.130.00 క Noturty 20 10 Coupon ato $1.000.00 12% 7% 20 $5,000.00 $1.000.00 7% 20 8% yield of the following bond if interest (coupon) is Yoars to Coupon Hate Print Done Maturity 00 8%
- The term structure for zero-coupon bonds is currently: Maturity (Years) YTM (%) 1 4.7% 123 5.7 6.7 Next year at this time, you expect it to be: Maturity (Years) YTM (%) 1 5.7% 23 2 6.7 7.7 3 Required: a. What do you expect the rate of return to be over the coming year on a 3-year zero-coupon bond? b. Under the expectations theory, what yields to maturity does the market expect to observe on 1- and 2-year zeros at the end of the year? c. Is the market's expectation of the return on the 3-year bond greater or less than yours? Complete this question by entering your answers in the tabs below. Required A Required B Required C What do you expect the rate of return to be over the coming year on a 3-year zero-coupon bond? Note: Round your answer to 1 decimal place. Rate of return % < Required A Required BGiven the following two three-year bonds, what is the three-year spot rate? Bond Face Value Annual Coupon Rate A 1000 0.05 B 1000 0.07 Possible Answers A 7% B с D E 15% 19% 24% 36% Price 900 1100Q2. Duration and Convexity Bond A has face value at $1,000, coupon rate of 6% paid semi-annually, 5 years to maturity, and a yield to maturity of 7%. Using the bond pricing formula, calculate the price of the bond and duration. Calculate the convexity of the bond. Using the calculations from above, what is the “approximated bond price change” using duration and convexity, if the interest rate increases by 1%? What is the actual change in the bond price if the interest rate increases by 1%? Based on c) and d) above, discuss the roles of duration and convexity in estimating the price change. Which risk measure plays a bigger role? Suppose you have two bonds with the same maturity date but one bond has a 10% coupon rate while the other has a 5% coupon rate. Which of these two bonds would have a higher duration?