Portfolio A consists of a 6-year zero-coupon bond with a face value of $6,000 and a 11-year zero-coupon bond with a face value of $4,000. The current yield on all bonds is 4.75% per annum. (Answer with two decimal digits accuracy) The duration of portfolio A is Your Answer:

Portfolio A consists of a 6-year zero-coupon bond with a face value of $6,000 and a 11-year zero-coupon bond with a face value of $4,000. The current yield on all bonds is 4.75% per annum. (Answer with two decimal digits accuracy) The duration of portfolio A is Your Answer:

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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Portfolio A consists of a 6-year zero-coupon bond with a face value of $6,000 and a
11-year zero-coupon bond with a face value of $4,000. The current yield on all
bonds is 4.75% per annum. (Answer with two decimal digits accuracy)
The duration of portfolio A is
Your Answer:
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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
Bond A is a 4-year bond with a 10% coupon rate and Bond B is a 2-year bond with a 20% coupon rate. Both bonds have a face value of £100, and all coupons are paid annually, starting in year 1. Consider a portfolio that consists of one unit of Bond A and one unit of Bond B. The yield curve is flat at ? = 5%. What is the Macaulay duration of this portfolio?
Given a bond with face value $100 and with maturity in 4 years, that pays annual coupon of $28 in arrears. The bonds current value is $133 i) With strike price K = 131, a put option on the bond with maturity in 2 years has what present value? Using continuous compounding throughout.
A 5-year bond with a yield of 4% (continuously compounded), with a face value of $100, pays an 3% coupon at the end of each year. What is the bond’s price? (You can use your calculations for the next questions) A 5-year bond with a yield of 4% (continuously compounded) pays an 3% coupon at the end of each year. What is the bond’s duration? Use the calculations from the previous problem to make it easier, and you can use your duration answer for the following question.
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.
Compute the price of a risk-free bond with a face value of $1,000 that has seven years left to maturity, a coupon rate of 5%, and annual interest payments. Assume it just made a coupon payment (i.e., it has seven annual payments left). The current term structure of risk-free rates is provided below. Face value Coupon rate $ 1,000.00 5.00% Term structure Maturity 1 2 3 4 5 6 7 Risk-free yields 1.00% 1.50% 2.00% 2.50% 3.00% 3.50% 4.00% Coupon payment Face value Cash flows PV (CF) Price
9. An investor purchases 5 zero-coupon bonds, with terms of 1, 2, 3, 4, and 5 years. Each bond has a maturity value of 1,000, and is priced based on the following yield curve: Term (yrs.) Spot rate 2.4% 1 3.0% 3.4% 4 3.7% 5 3.9% What is the modified duration of the investor's portfolio? 2 3
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Consider purchasing a five-year, $1,040 par value bond with a 6% coupon and a 7% yield. The rates on the bond immediately after purchase increase to65% and stay there till maturity. Calculate the realised horizon yield on a bond that you intend to hold to maturity. Annual interest accrues.
What is the answer ?

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