None Part 2: Numerical Questions - 30 points (ELO 1 and 3)Assignment 4 (10 points)Portfolio A consists of a one-year zero-coupon bond with a face value of AAAA and a 5-year zero-coupon bond with a face value of BBBB.Portfolio B consists of a X-year zero-coupon bond with a face value of 6,000.The current yield on all bonds is 4.5% per annum (continuously compounded). You arerequested to show detailed calculations.4.1 Choose your own estimates for the different values of AAAA and BBBB (between 1000and 10000).4.2 Knowing that both portfolios have the same duration, what is the maturity X ofportfolio B?4.3 Show that the percentage changes in the values of the two portfolios for a 0.1% perannum increase in yields are the same.4.4 What are the percentage changes in the values of the two portfolios for a 10% perannum increase in yields?4.5 What are the convexities of the portfolios?4.6 To what extent do duration and convexity explain the difference between thepercentage changes calculated?

4.6 To what extent do duration and convexity explain the difference between the percentage changes…

Answered: Part 2: Numerical Questions - 30 points…

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter4: Bond Valuation

Section: Chapter Questions

Problem 14P: Current Yield with Semiannual Payments A bond that matures in 7 years sells for $1,020. The bond has...

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Consider a bond portfolio with the following two bonds under an annual effective interest rate of 3%: 3-year zero-coupon bond with face value of $1,000 • 3-year coupon bond with face value of $1,000 and annual coupons paid at the end of each year, currently priced at par Calculate the Macaulay duration of the bond portfolio. 2.83 3.00 O 2.91 O2.02 O 3.12
P: A 8% coupon, 30-year maturity bond with par value of $1,000. Assume annual interest rate is 8% (1) What is the bond's price using semiannual compounding? (2) Ifr=10%, what is P? r(YTM): Find the YTM for a 8% coupon, 30-year bond selling at $1276.76 (semiannual coupon payments) What is the coupon rate, current yield and YTM of the bond? What is the relationship among them?
A 14-year, $1,000 par value Fingen bond pays 6% interest annually (assume semi- annual payments). The price of the bond is $1,100 and the market's required yield to maturity on a comparable-risk bond is 5.50%. a. Compute the bonds yield to maturity. b. Determine the value of the bond to you, given your required rate of return (the YTM on a comparable-risk bond). c. Should you purchase the bond? a. b. Coupon rate Par (FV) Years (n) m PMT PV (price) YTM Coupon rate Par (FV) Years (n) m PMT PV (price) YTM 6.0% $1,000 14 2 $30 Calculation $1,100 6.0% $1,000 14 2 $30 Calculation Note: if you want PV to be a positive number, you must use a minus sign for both pmt and FV 5.50%
● Calculate and interpret the Macaulay and modified durations of a a) 3-year 10% semi-annual bond (Bond C) when the required yield is 10%, and a b) 3-year zero-coupon bond (Bond D) when the required yield is 10% 16
Current Yield with Semiannual Payments A bond that matures in 7 years sells for $1,020. The bond has a face value of $1,000 and a yield to maturity of 10.5883%. The bond pays coupons semiannually. What is the bond’s current yield?
Bond Valuation with Semiannual Payments Renfro Rentals has issued bonds that have a 10% coupon rate, payable semiannually. The bonds mature in 8 years, have a face value of $1,000, and a yield to maturity of 8.5%. What is the price of the bonds?
Bond Valuation - You are examining three bonds with a par value of $ 1,000 (you receive $1,000 at maturity) and are concerned with what would happen to their market value if interestRates (or the market discount rate) changed. The three bonds are:• Bond A — 3 years left to maturity that pays 10% per year compounded semiannually• Bond B — 7 years left to maturity that pays 10% per year compounded semiannually• Bond C — 20 years lest to maturity that pays 10% per year compounded semiannuallyWhat would be the value of the bonds if the market discount rate were :A. 10% per year compounded semiannually?B. 4% per year compounded semiannually?C. 16% per year compounded semiannually?D. What observations can you make about these results?
Question 1. Duration and Banking Consider a 5-year bond with annual coupon payments. The bond has a face value (prin- cipal) of $100 and sells for $95. Its coupon rate is 3%. (The coupon rate is the ratio between the coupon value and the face value). The face value is paid at the maturity year in addition to the last coupon payment. 1. Calculate the bond's yield to maturity (YTM) and duration using its YTM. 2. Suppose the bond's YTM changes in the same way as a 5-year T-bill interest rate. Use the bond's modified duration to evaluate the relative change in the 5-year bond's value if the interest rate on 5-year T-bills falls by one basis point, that is, by 0.0001. This part was extracted from the balance sheet of the First Bank of Australia: Assets (Billion AUD) Bond 80 Liabilities (Billion AUD) Fixed-rate liabilities 60 where "Bond" here refers to the bond we specified above and the fixed-rate liabilities (banks future payment obligations) have an average duration of 4 years and YTM of…
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
Which investment should I choose? Bond A: BBB Corporate bond, Price=$1,100, Par=$1,000, Coupon rate=4% (semiannual coupons), 13 years to maturity Bond B: BBB Corporate bond, Price=$5,900, Par=$5,000, Coupon rate=4.8% (semiannual coupons), 13 years to maturity Bond A Bond B They are equivalent, so both are the same Not enough info.
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

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