In a particular bond market, the two- year par yield at time t = 0 is 4.15% and the issue price at time t = 0 of a two-year fixed interest stock, paying coupons of 8% annually in arrears and redeemed at 98, is $105.40 per $ 100 nominal. Calculate: (a) the one - year spot rate (b) the two-year spot rate -

In a particular bond market, the two- year par yield at time t = 0 is 4.15% and the issue price at time t = 0 of a two-year fixed interest stock, paying coupons of 8% annually in arrears and redeemed at 98, is $105.40 per $ 100 nominal. Calculate: (a) the one - year spot rate (b) the two-year spot rate -

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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The function s(t) = 0.16 − 0.04 e− t/4 provides the term structure of effective annual rates of zero coupon bonds of maturity t, with t in years. Find the following: (a) The effective annual rate of a 3 year zero coupon bond. (b) The 2-year forward effective annual rate for a one year period. (c) The forward effective annual rate for a one year period, 3 years forward. (d) The 3-year forward effective annual rate for a 3 month period. (e) The forward effective annual rate for a one day period, 3 years forward (the “overnight” rate).(Use 1/365 for a one-day period.)
Based on the table below, the value per 100 of par value of a three-year, 3.5% coupon bond, with interest payments paid annually, is closest to: Forward rate 1 year forward rate at time zero (1f0) 1 year forward rate 1 year from now (1f1) Value 0.80% 1.12% 3.94% 1 year forward rate 2 year from now (1f2) 1 year forward rate 3 year from now (1f3) 1 year forward rate 4 year from now (1f4) 3.28% 3.14% All rates are annual rates stated for a periodicity of one (effective annual rates). 105.36 O 105.82 104.60
Suppose a seven-year, $1,000 bond with a coupon rate of 8.1% and semiannual coupons is trading with a yield to maturity of 6.27%. 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?
Given the following spot rates, calculate the value of a 3-year, 6% annual-coupon bond. Spot rates: 1-year: 5% 2-year: 5% 3-year: 6% A. $1,001.56 B. $1,044.73 C. $1,094.56 D. $1,114.29 Clear my choice
Assume an FI has a position in 10-year zero coupon bonds. The current yield to maturity is 5 per cent. Maximum adverse daily yield move is already calculated at 46 basis points. What is the price volatility of these bonds? (Give your answer to 2 decimal places.)
Given the data below, find the two missing values. Bond par $1,250 Years remaining to maturity: 30 Years remaining to earliest call: 15 Coupon rate: 7.25% Payments per year: 2 Price paid for bond: $786 Call premium: (Calculate in Excel) Yield to Call - Use RATE() ( Calculate in excel)
Using the following spot rate for pricing the bond, what is the present value of a 3- year security that pays a fixed annual coupon of 6%? Year 1: 4.5% Year 2: 5.0% Year 3: 6.0% $1,010 O $1,002 $998
A 10-year, 6.1-percent coupon bond is selling for 102.0 percent of par. What is the bond's market yield if it makes semi-annual coupon payments? (Round answer to 3 decimal places, e.g. 5.795.) Please show and explain your steps in detail and show how to calculate this on a financial calculator as well.
Given the following table of annual effective forward rates, find the present value of a 3-year bond paying 16% annual coupons and having a par value of 130. (image attached) The answer is either 157 or 268
The following information is to be used in the following two questions: Using the expectations hypothesis, You observe the following bonds trading in the market: . a 1-year zero priced at $925.00 • a two-year 10% coupon bond trading at a par value of $10,000 What is the one-year interest rate (expressed in %)?
Using the expectations hypothesis theory for the term structure of interest rates, determine the expected return for securities with maturities of two, three, and four years based on the following data. (Input your answers as a percent rounded to 2 decimal places.) 1-year T-bill at beginning of year 1 1-year T-bill at beginning of year 2 1-year T-bill at beginning of year 3 1-year T-bill at beginning of year 4 2-year security 3-year security 4-year security Expected Return % % % Interest Rate 61 98 7% 108
A newly issued bond pays its coupons once a year. Its coupon rate is 4.7%, its maturity is 15 years, and its yield to maturity is 7.7%. a. Find the holding-period return for a one-year investment period if the bond is selling at a yield to maturity of 6.7% by the end of the year. (Do not round intermediate calculations. Round your answer to 2 decimal places.) Holding-period return % b. If you sell the bond after one year when its yield is 6.7%, what taxes will you owe if the tax rate on interest income is 40% and the tax rate on capital gains income is 30%? The bond is subject to original-issue discount (OID) tax treatment. (Do not round intermediate calculations. Round your answers to 2 decimal places.) Tax on interest income $ Tax on capital gain $ Total taxes $ c. What is the after-tax holding-period return on the bond? (Do not round intermediate calculations. Round your answer to 2 decimal places.)…

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