MLK Bank has an asset portfolio that consists of $100 million of 30-year, 10 percent annual coupon, $1,000 bonds that sell at par. a-1. What will be the bonds' new prices if market yields change immediately by ± 0.10 percent? a-2. What will be the new prices if market yields change immediately by ± 2.00 percent? b-1. The duration of these bonds is 10.3696 years. What are the predicted bond prices in each of the four cases using the duration rule? b-2. What is the amount of error between the duration prediction and the actual market values? Complete this question by entering your answers in the tabs below. Required A1 Required A2 Required B1 Required B2 What is the amount of error between the duration prediction and the actual market values? (Do not round intermediate calculations. Enter all answers as positive numbers. Round your answers to 2 decimal places. (e.g.. 32.16)) Amount of Error At 0.10% Al-0.10% At+2.0% Al-2.0%

MLK Bank has an asset portfolio that consists of $100 million of 30-year, 10 percent annual coupon, $1,000 bonds that sell at par. a-1. What will be the bonds' new prices if market yields change immediately by ± 0.10 percent? a-2. What will be the new prices if market yields change immediately by ± 2.00 percent? b-1. The duration of these bonds is 10.3696 years. What are the predicted bond prices in each of the four cases using the duration rule? b-2. What is the amount of error between the duration prediction and the actual market values? Complete this question by entering your answers in the tabs below. Required A1 Required A2 Required B1 Required B2 What is the amount of error between the duration prediction and the actual market values? (Do not round intermediate calculations. Enter all answers as positive numbers. Round your answers to 2 decimal places. (e.g.. 32.16)) Amount of Error At 0.10% Al-0.10% At+2.0% Al-2.0%

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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A firm's bonds have a maturity of 14 years with a $1,000 face value, have an 8% semiannual coupon, are callable in 7 years at $1,074.21, and currently sell at a price of $1,136.52. What are their nominal yield to maturity and their nominal yield to call? Do not round intermediate calculations. Round your answers to two decimal places. YTM: % YTC: % What return should investors expect to earn on these bonds? Investors would expect the bonds to be called and to earn the YTC because the YTC is less than the YTM. Investors would expect the bonds to be called and to earn the YTC because the YTC is greater than the YTM. Investors would not expect the bonds to be called and to earn the YTM because the YTM is greater than the YTC. Investors would not expect the bonds to be called and to earn the YTM because the YTM is less than the YTC.
Your company wants to raise $8.0 million by issuing 30-year zero-coupon bonds. If the yield to maturity on the bonds will be 5% (annual compounded APR), what total face value amount of bonds must you issue?
A firm's bonds have a maturity of 10 years with a $1,000 face value, have an 8% semiannual coupon, are callable in 5 years at $1,054.36, and currently sell at a price of $1,104.71. What are their nominal yield to maturity and their nominal yield to call? Do not round intermediate calculations. Round your answers to two decimal places. YTM: % YTC: % What return should investors expect to earn on these bonds? Investors would expect the bonds to be called and to earn the YTC because the YTC is less than the YTM. Investors would expect the bonds to be called and to earn the YTC because the YTC is greater than the YTM. Investors would not expect the bonds to be called and to earn the YTM because the YTM is greater than the YTC. Investors would not expect the bonds to be called and to earn the YTM because the YTM is less than the YTC.
Harbor Inc. wants to raise $80 million by issuing 10-year zero-coupon bonds at an annual interest rate of 5.4%. What should be the total face value of the bonds (in $ million)?
Doisneau20-year bonds have an annual coupon interest of8 percent, make interest payments on a semiannual basis, and have a $1,000par value. If the bonds are trading with a market's required yield to maturity of18 percent, are these premium or discount bonds? Explain your answer. What is the price of the bonds?
A firm's bonds have a maturity of 10 years with a $1,000 face value, have an 8% semiannual coupon, and currently sell at a price of $1,100. What are their nominal yield to maturity (YTM)? A) 6.52% B) 6.84% C) 6.79% OD) 6.74% E) 6.62%
ABC Inc. is planning to issue new annual coupon bonds with a maturity of ten years. The company outstanding (annual coupon paying) bonds have a 7.5% coupon rate and mature in ten years. They are currently selling for $1,013.03. What would the coupon rate on the new bonds have to be such that they will sell at par upon issuance?
Arco Industries has a bond outstanding with 15 years to maturity, an 8.25% nominal coupon, semiannual payments, and a $1,000 par value. The bond has a 7.20% yield to maturity, but it can be called in 6 years at a price of $1,045. What is the bond's yield to call? Hint: Calculate the bond's price based on the YTM, and then use that price to find the YTC. Your answer should be between 4.08 and 10.64, rounded to 2 decimal places, with no special characters.
Today you buy ten zero-coupon bonds which will mature in exactly 5 years. Each of these ten bonds has a face value of $100. The price you pay today for each of these bonds is $82. Assume a year goes by. Now there are only 4 years left before these bonds mature. You sell these bonds in the market for $75 per bond. What is the return you have realized on your investment in these bonds? -7.00% -9.26% -8.54% We do not have sufficient information about interest rates to calculate this answer. -9.33%
A bond that matures in 1212 years has a $1 comma 0001,000 par value. The annual coupon interest rate is 1414 percent and the market's required yield to maturity on a comparable-risk bond is 1515 percent. What would be the value of this bond if it paid interest annually? What would be the value of this bond if it paid interest semiannually?
A firm's bonds have a maturity of 12 years with a $1,000 face value, have an 11% semiannual coupon, are callable in 6 years at $1,209.43, and currently sell at a price of $1,365.89. What are their nominal yield to maturity and their nominal yield to call? Do not round intermediate calculations. Round your answers to two decimal places. YTM: % YTC: % What return should investors expect to earn on these bonds? I. Investors would expect the bonds to be called and to earn the YTC because the YTC is less than the YTM. II. Investors would expect the bonds to be called and to earn the YTC because the YTC is greater than the YTM. III. Investors would not expect the bonds to be called and to earn the YTM because the YTM is greater than the YTC. IV. Investors would not expect the bonds to be called and to earn the YTM because the YTM is less than the YTC.
A firm's bonds have a maturity of 12 years with a $1,000 face value, have an 11% semiannual coupon, are callable in 6 years at $1,211.14, and currently sell at a price of $1,370.78. What are their nominal yield to maturity and their nominal yield to call? Do not round intermediate calculations. Round your answers to two decimal places. YTM: % YTC: % What return should investors expect to earn on these bonds? Investors would not expect the bonds to be called and to earn the YTM because the YTM is greater than the YTC. Investors would not expect the bonds to be called and to earn the YTM because the YTM is less than the YTC. Investors would expect the bonds to be called and to earn the YTC because the YTC is less than the YTM. Investors would expect the bonds to be called and to earn the YTC because the YTC is greater than the YTM.

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