i. Suppose at t = 0 you think that G - Sec 10-year maturity on - the runbond is under-priced, and you bet that its price will increase in thefuture. You don't have the bond in your hand, but you know there is arepo-market where you can take your position. Let the price of the bondis Rs. 97.85. Let the repo - dealer charges a hair - cut of Rs. 0.25. Sayafter time t = 10 days, the price of the bond becomes Rs. 98.25. Find therealized return of the bond. (Use n/360 notation).ii. What if the price reaches 98.25 after t = 180 days. Can you still makeprofit?

Realized Return Calculation for 10 DaysFormula:Realized Return=(Initial InvestmentFinal…

Answered: i. Suppose at t = 0 you think that G -…

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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1. Present discounted value (you might want to use a calculator or excel to compute this) a) Suppose a bond pays a coupon of 200$ for four years and a face value of 2000$ in year five. If the discount rate is 8%, what is the Present Discounted Value of this bond? b) If Nilly discounts the future at 5%, what is the maximum amount they’d be willing to pay for a 1 year, no coupon, 10000$ bond? If Shifty discounts the future at 10% what is the minimum amount they’d be willing to accept for the same bond? c) Suppose an investment project costs 1000$ upfront (year 2022), 1000$ next year (2023), then 500$ in years 2024 and 2025 each. Then it pays benefits of 1500$ for the following three years (2026, 2027, 2028). If the discount rate is 10%, is the project worth it?
1. Consider a bond market where the demand for a particular bond is given by the equatione Bd = 2360 – 0.8P< where Bd is the number of bonds demanded and P is the price of the bond. Suppose the supply of this bond is fixed at 1400. (a) Calculate the price of the bonde (b) Suppose the bond is a consol with an annual coupon of 45. What is the yield on this security?
The market price of a 100 TL nominal value treasury bill is 94 TL and has 75 days to maturity. What is the maturity yield of this bonus? (How much return will he get if he buys this bond and holds it for 75 days?) A-) %6,38 B-) %7,05 C-) %6,96 D-) %5,33 E-) %6,67
Please show work without calc or excel. In other words the actual equation.
You have just purchased an Australian Treasury Bill, which is a zero-coupon bond security with a positive yield to maturity. The yield to maturity has increased by 0.5% immediately after your purchase. In which direction should the price have moved? NOTE: a zero-coupon bond is one that only pays a single payment (i.e., the principal amount) at maturity. No coupons are paid. A.Upwards B.Cannot determine from available information C.Price will remain unchanged D.Downwards E.None of the other answers
2
Suppose the interest rate on a 1-year T-bond is 5.00% and that on a 2-year T-bond is 6.40%. Assume that the pure expectations theory is NOT valid, and the MRP is zero for a 1-year T-bond but 0.40% for a 2-year bond. What is the yield on a 1-year T-bond expected to be one year from now?
(a) If you have a bond with a face value of $10,000 and a coupon rate of 4%, but the market interest rate for such bonds is 5%, will your bond sell at par, at a premium, or at a discount? Explain why
1- If the classic balance sheet formula were written as follows, what would be the net working capital? Current Liabilities - Current Assets Fixed Assets - Long-Term Liabilities O (Total Assets - Fixed Assets) - (Current Liabilities) O Equity – Current Assets
13. Consider a coupon bond with coupon payment=4.25, M=100, and n=2. Suppose ?1 = 4% and ?2 = 4.24%. Consider a forward contract for the delivery of the coupon bond in one period from today. Calculate the forward price using the following two approaches: 1) use the forward rate to price the forward contract; 2) use the cost of carry approach: spot-forward parity adjusted for the coupons.
In calculating the current price of a bond paying semiannual coupons, one needs to O use double the number of years for the number of payments made. O use the semiannual coupon. O use the semiannual rate as the discount rate. O All of the above needs to be done.
Please do not give solution in image formate thanku. A 2-year maturity bond with face value of $1,000 makes annual coupon payments of $96 and is selling at face value. What will be the annual rate of return on the bond if its yield to maturity at the end of the year is a. 6%? Rate of return in % = ? b. 9.6%? Rate of return in % = ? c. 11.6%? Rate of return in % = ?

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