MLK Bank has an asset portfolio that consists of $100 million of 30-year, 8 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 12.1608 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 will be the bonds' new prices if market yields change immediately by ± 0.10 percent? (Do not round intermediate calculations. Enter all answers as positive numbers. Round your answers to 2 decimal places. (e.g., 32.16)) At + 0.10% At -0.10% Bonds' New Price $ 988.85 1,011.36

MLK Bank has an asset portfolio that consists of $100 million of 30-year, 8 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 12.1608 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 will be the bonds' new prices if market yields change immediately by ± 0.10 percent? (Do not round intermediate calculations. Enter all answers as positive numbers. Round your answers to 2 decimal places. (e.g., 32.16)) At + 0.10% At -0.10% Bonds' New Price $ 988.85 1,011.36

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

See similar textbooks

Similar questions

A firm's bonds have a maturity of 8 years with a $1,000 face value, have an 11% semiannual coupon, are callable in 4 years at $1,144.52, and currently sell at a price of $1,264.97. 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 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. Investors would expect the bonds to be called and to earn the YTC because the YTC is less than the YTM.
Based on your risk assessment, you require an 8% rate of return on ZWT Inc. bond. The term-to-maturity is 20 years and the coupon rate is 59% paid semiannually. The YTM is 12%. What is the current market price of the bond? А. S703.11 В. $535.98 C. $473.38 D. $396.24 E. S834.54
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 considers to invest in two zero-coupon bonds (A and B) in order to cover for a selection of its future liabilities. These zero-coupon bonds will be redeemed in 7 years' and in 20 years' time, respectively. The given selection of its liabilities consist of £11 million due in 11 years' time and £14 million due in 16 years' time. Find the value of bond B at a rate of interest of 5% per annum effective such that the first two conditions for Redington's theory of immunisation are satisfied
You're thinking of buying three separate bonds. Each bond has a face value of $1,000 and will maturity after ten years. Since both of the bonds have the same amount of risk, their yield to maturity is the same. Bond A pays an annual coupon of 8%, Bond B pays a 10% annual coupon, and Bond C pays a 12% annual coupon. Bond B is sold at par value. Which of the above assertions is more accurate if interest rates are supposed to stay at their present pace for the next ten years?a. Bond A is sold at a discount (less than par) and is projected to rise in value over the next year.b. During the next year, Bond A's price is expected to fall, Bond B's price is expected to remain unchanged, and Bond C's price is expected to rise.c. Since all of the bonds have the same yield to maturity, they should all have the same amount, and because interest rates are unlikely to adjust, their values should all stay the same once the bonds mature.d. Bond C is sold at a premium (it is worth more than par) and is…
Taussig Corp.'s bonds currently sell for $1,220. They have a 6.35% annual coupon rate and a 20-year maturity, but they can be called in 5 years at $1,050. What rate of return should an investor expect to earn if he or she purchases these bonds?
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.
The Moonlight Mile Corporation wants to issue $1,000,000 of new bonds. Their bonds will have a coupon rate of 8% paid semiannually, will have 30 years to maturity, will have a par value of $1,000, and have a yield to maturity of 7%. How many bonds should Moonlight Mile sell in order to raise $1,000,000
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.

Recommended textbooks for you

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

SEE MORE TEXTBOOKS