Look at the following information given for a bond investment. If yield to maturity is increased from 10% to 20% after ayear, fill the final three columns of the table (Drag and Drop the correct answer in the relevant box)in Rate of RatePricethe second capitalofYears to maturity whenbond is purchasedInitialreturngain (%) (%)Coupon rate10%Priceyear3010002010%10001010%1000-40.31%-30%-38%-40%48 44%49.75%Rs.502.53Rs 596.90Rs 515.65

Initial YTM = 10% Initial Price = 1000 Face Value = 1000 Coupon = Coupon Rate * Face Value =…

Look at the following information given for a bond investment. If yield to maturity is increased from 10% to 20% after a year, fill the final three columns of the table (Drag and Drop the correct answer in the relevant box) in Rate the second capital gain (%) Price of Rate of Years to maturity when bond is purchased Initial return Coupon rate Price year (%) 30 10% 1000 20 10% 1000 10 10% 1000 -40 31% -30% -38% -40% -48 44% -49.75% Rs.502.53 Rs.596.90 Rs. 515.65

Look at the following information given for a bond investment. If yield to maturity is increased from 10% to 20% after a year, fill the final three columns of the table (Drag and Drop the correct answer in the relevant box) in Rate the second capital gain (%) Price of Rate of Years to maturity when bond is purchased Initial return Coupon rate Price year (%) 30 10% 1000 20 10% 1000 10 10% 1000 -40 31% -30% -38% -40% -48 44% -49.75% Rs.502.53 Rs.596.90 Rs. 515.65

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter8: Analysis Of Risk And Return

Section: Chapter Questions

Problem 20P

See similar textbooks

Similar questions

Using a spreadsheet, find the yield-to-maturity (YTM) on an 8-year, 6% coupon bond such that the present value of its coupons equals the present value of its par value. Report your answer as a percentage with 2-digit precision (ex. show 12.3456% as 12.35). hint: "Goal seek"
1) Explain the concept of interest rate risk in bond investment 2) show a numerical example of it by calculating % changes in price for 1 year and 3-year annual coupon bonds. Assume coupon interest rate = 12%, Yield to Maturity = 6%, Face value= 100. Use 2% increase in YTM (i.e., 6% → 8%).
Suppose that a bond with an 8% coupon rate and semiannual coupons has a face value of $1,000, 10 years to maturity. The required rate (Yield to Maturity, YTM) is 5%. Draw a timeline to identify the amount and timing of cash flows obtained with the bond and calculate the bond value. Redo part (a) if YTM is 10%. Next, use the results of parts (a) and (b) to show the relationship among YTM, coupon rate and bond value.
Suppose a bond with a 12% coupon rate and semiannual coupons, has a face value of $1,000, 10 years to maturity and is selling for $1,197.93. Calculate: A. Current yield, and B. YTM if the price of the bond in one year is $2,014.83 STEPS MAY INCLUDE USE OF FINANCIAL CALCULATOR (BA 2 PLUS)
Using Excel, compute yield-to-maturity for the following bonds (report your Excel formulas and their inputs): Price = 90, Fixed Coupon Rate = 5%, Maturity = 5 years, Coupon Frequency = 1 b. Price = 90, Fixed Coupon Rate = 5%, Maturity = 5 years, Coupon Frequency = 2 Price = 90, Fixed Coupon Rate = 5%, Maturity = 5 years, Coupon Frequency = 4 а. %3D %3D С. %3D For each bond above, compute the Effective Annual Rate so that you can directly compare the bonds with different coupon payment frequencies. Based on these comparable effective annual rates, which bond has the highest expected return? How does the effective annual rates differ from yield-to-maturities computed in above? What is the explanation of these differences?|
Suppose you are given the following information about the default- free, coupon-paying yield curve: maturity (years) 1 Coupon rate (annual payments) 0% YTM 2 10% 3.000% 4.908% 3 6% 6.840% Use arbitrage to determine the yield to maturity of a two-year and three year zero-coupon bond . (express in percentages, round to whole percentage)
Assume the below information to answer the following question. Last Price A. 14.2% B. 18.9% OC. 16.8% OD. 11.0% Company Coupon Maturity Ford (F) 11.0 July 31, 2014 Based on the above table, what is the last yield for this bond? Last Yield 65.50 ? EST EST VOL. Spread UST (000s) 104 10 5,100 }
There are three bonds that mature at the same time, have the same par value, and are expected to pay their first annual coupon 1 next year. The bonds are detailed in the below table. Bond A B с PV PV PV Present Value B ? ? ? PV B If ca r, then what can we say about the prices of the bonds today? (Enter >, <, or ?) PV C PV Yield to Maturity C r rb Coupon Rate ca с с
Consider a bond that has a price of $1046.76, a coupon rate of 8.8%, a yield to maturity of 8.1%, a face value of $1000, and 10 years to maturity. What is the current yield? Enter your answer as a percentage. Do not include the percentage sign in your answer. Enter your response below. Enter your answer to 2 DECIMAL PLACES. Number %
Assume the zero-coupon yields on default-free securities are as summarized in the following table: (Click on the following icon in order to copy its contents into a spreadsheet.) Maturity (years) Zero-coupon YTM 1 5.00% 2 5.30% 3 5.50% 4 5 5.70% 5.80% Consider a five-year, default-free bond with annual coupons of 6% and a face value of $1,000. a. Without doing any calculations, determine whether this bond is trading at a premium or at a discount. Explain. b. What is the yield to maturity on this bond? c. If the yield to maturity on this bond increased to 6.20%, what would the new price be? a. Without doing any calculations, determine whether this bond is trading at a premium or at a discount. Explain. The bond is trading at because its yield to maturity is a weighted average of the yields of the zero-coupon bonds. (Select from the drop-down menu.)
Suppose the current, zero-coupon, yield curve for risk-free bonds is as follows: (Click on the following icon in order to copy its contents into a spreadsheet.) Maturity (years) 1 4.45% 2 4.80% Yield to Maturity a. What is the price per $100 face value of a 3-year, zero-coupon, risk-free bond? b. What is the price per $100 face value of a 4-year, zero-coupon, risk-free bond? c. What is the risk-free interest rate for a 3-year maturity? Note: Assume annual compounding. a. What is the price per $100 face value of a 3-year, zero-coupon, risk-free bond? The price is $ (Round to the nearest cent.) b. What is the price per $100 face value of a 4-year, zero-coupon, risk-free bond? The price is $. (Round to the nearest cent.) c. What is the risk-free interest rate for a 3-year maturity? The risk-free rate is %. (Round to two decimal places.) C--- 3 5.06% 4 5.25% 5 5.38%
Give typing answer with explanation and conclusion Consider a 6% semiannual coupon payment bond with five years to maturity currently priced at par (YTM = 6.00%). Using a 30 bp increase and 30 bp decrease in yield to maturity, calculate the approximate convexity for this bond.