Problem 1 : You are given the following information: The price of a 6% coupon bond maturing in 6 months is $99.40 The price of a 10% coupon bond maturing in 1 year is $102.90 The price of a 12% coupon bond maturing in 2 years is $105 The price of a 15% coupon bond maturing in 2 years is $108 a) b) c) d) explain why. Find a 6-month spot rate Find 1-year spot rate ) Find 2-year spot rate: Can you find the price of a 10% coupon bond maturing 2 years from now? If yes, find it. If no,

Problem 1 : You are given the following information: The price of a 6% coupon bond maturing in 6 months is $99.40 The price of a 10% coupon bond maturing in 1 year is $102.90 The price of a 12% coupon bond maturing in 2 years is $105 The price of a 15% coupon bond maturing in 2 years is $108 a) b) c) d) explain why. Find a 6-month spot rate Find 1-year spot rate ) Find 2-year spot rate: Can you find the price of a 10% coupon bond maturing 2 years from now? If yes, find it. If no,

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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4. Using Excel or your favorite software: (a) A 5-year Treasury newly issued on February 15, 2021 would have a coupon equal to the 5-year par coupon and would have been priced at par. Confirm that your par coupon results in a par price for this bond. (b) Calculate the 6-month forward rates for all the cash-flow dates of your 5-year bond. Confirm that a 5-year floating rate bond with coupons equal to the forward rates prices at par. (c) Consider the case where the Federal Reserve increases rates in a way that results in an increase of all forward rates by 200 basis points: i. Recalculate the price of the fixed-rate bond using the par coupon you calcu- lated in part 4(a) above. Note that the discount factors will have changed because of the parallel shift in the forward curve. Briefly explain the price change or lack thereof. ii. Recalculate the price of the 5-year floating-rate bond. Briefly explain the price change or lack thereof. (d) A security known as an interest-rate swap can be…
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Create an essay using the following information: Assume you are evaluating whether to purchase the following $1,000 face value bonds: Co. X bond with a 6% coupon rate that matures in 9 years. Co. Y bond with an 11% coupon rate that matures in 7 years. Also, you may wish to review https://t.ly/wJqNM and https://t.ly/2EX2k about corporate junk (junk bonds). Given the scenario and information about junk bonds, address the following: Value these bonds assuming a market rate on similar risk bonds is 7% and interest is paid annually. Value these bonds assuming a market rate on similar risk bonds is 7% and interest is paid semi-annually. Value these bonds assuming a market rate on similar risk bonds is 12% and interest is paid annually. Assuming both bonds were issued at the same time, why would the Co. Y bond pay a higher coupon rate?
What is the last payment amount of a bond with 1 payment per years, Coupon Rate 8.50% and principal and $514,000 principal and matures in 10 years? Answer with two decimal digits accuracy. Example: 631062.50
Subject:- finance
You have a chance to buy a corporate bond. Here are the details: Years until maturity = 10 Annual interest income = $100/year (assume end of the year) Par value paid to you when the bond matures in 10 years = $1,000 Assume the interest is paid yearly. Market rates are currently 12% and coupon rate is 10% What is this bond's value? Group of answer choices $228.91 $ 886.99 $1,132.97 $100.00
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