Problem 7-21 Compute Bond Price (LG7-4) Compute the price of a 5.8 percent coupon bond with 10 years left to maturity and a market interest rate of 9.4 percent. (Assume interest payments are semiannual.) (Do not round intermediate calculations and round your final answer to 2 decimal places.) Bond price $ Is this a discount or premium bond? Discount bond Premium bond
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- bed ok nt ences Problem 3-10 (LG 3-2) Calculate the yield to maturity on the following bonds: a. A 9.4 percent coupon (paid semiannually) bond, with a $1,000 face value and 19 years remaining to maturity. The bond is selling at $965. b. An 8.4 percent coupon (paid quarterly) bond, with a $1.000 face value and 10 years remaining to maturity. The bond is selling at $901. c. An 11.4 percent coupon (paid annually) bond, with a $1,000 face value and 6 years remaining to maturity. The bond is selling at $1,051. (For all requirements, do not round intermediate calculations. Round your percentage answers to 3 decimal places. (e.g., 32.161)) Yield to maturity b. Yield to maturity Yield to maturity a C. % per year % per year % per yearINV3 P1a Bond # 1 2 3 4 1 - year strip bond 2- year strip bond 2-year 6% coupon bond 2-year 7% coupon bond Purchase Price for the bond) 950 ? ? ? Year 1 cash flow 1000 0 60 70 Year 2 cash flow 0 1000 1060 1070 Yield to Maturity ? ? 5.50% ? Fill in the missing pieces from the following table using the Law of One Price. Assume all these bonds have the same risk, the yield curve is flat, and any coupon payments are paid annually.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…
- * Assignment 3 i Assume coupons are paid annually. Here are the prices of three bonds with 10-year maturities. Assume face value is $100. Bond Coupon (%) 248 a. What is the yield to maturity of each bond? b. What is the duration of each bond? Price (%) 80.36 96.95 135.22 Complete this question by entering your answers in the tabs below. Required A Bond Coupon (%) 2 4 8 Required B What is the yield to maturity of each bond? Note: Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places. YTM % % % Saved 22255 35445Question Help ▼ Assume that a bond will make payments every six months as shown on the following timeline (using six- month periods): Period 1 39 Cash Flows 20.72 $20.72 $20.72 $20 a. What is the maturity of the bond (in years)? b. What is the coupon rate (as a percentage)? c. What is the face value? a. What is the maturity of the bond (in years)? The maturity is years. (Round to the nearest integer.) b. What is the coupon rate (as a percentage)? The coupon rate is %. (Round to two decimal places.) c. What is the face value? The face value is $ (Round to the nearest dollar.) Enter your answer in each of the answer boxes.K Assume that a bond will make payments every six months as shown on the following timeline (using six-month periods): 0 2 5 Period $19.53 a. What is the maturity of the bond (in years)? b. What is the coupon rate (as a percentage)? c. What is the face value? Cash Flows View an example Get more help. ★ a. What is the maturity of the bond (in years)? The maturity is years. (Round to the nearest integer.) A 6 1 MacBook Pro & 7 $19.53 * 8 9 C 59 $19.53 60 $19.53+$1,000 Clear all BUB 0 {
- Question 3 (Bond and Equity Valuation) Bond A is a $1,000, 6% quarterly coupon bond with 5 years to maturity. (a) If you bought Bond A today at a yield (APR) of 8%, what is your purchase price? Is this a premium or discount bond? Why? (b) One year later, Bond A's YTM (APR) has gone down to 6% and you sell it immediately after receiving the coupon. (i) What is the current yield? (ii) What is the capital gains yield? (iii) What is the one-year total rate of return (in APR) if the coupons are reinvested at 2% per quarter during the holding period? (iv) Can Bond A’s one-year total rate of return be determined correctly by simply adding up the current yield and the capital gains yield? Explain your answer without calculations.Bond valuationSemiannual interest Calculate the value of each of the bonds shown in the following table all of which pay interest semlannua below in order to copy its contents into a spreadsheet Coupon interest rate Years to maturity Required stated annual retum Bond Par Value $1.000 500 500 A B 12 14 The value of bond A is S710 98| (Round to the nearest cent.)Bond Valuation-Semiannual Interest: Calculate the value of each of the bonds shown in the following table, all of which pay interest semiannually. Bond Per Value Coupon Interest Rate Years to Maturity Required stated annaul return A $1,000 9% 9 11% B 500 13 20 12 C 500 12 5 15 The value of bond A is? The value of Bond B is? The value of Bond C is? Remember to round all answers to the nearest cent.
- 31 ation An 8%, 8-year bond pays annual coupons and has 6 years to maturity. If the market interest rate is 9%, calculate the price of this bond. Show the (abbreviated) time line, the key entries/steps of FCS, and the (abbreviated) equation/expression of NS. Typing tips:Prices of zero-coupon bonds reveal the following pattern of forward rates: Year 123 3 Forward Rate 6% 9 8 In addition to the zero-coupon bond, investors also may purchase a 3-year bond making annual payments of $35 with par value $1,000. a. What is the price of the coupon bond? (Do not round intermediate calculations. Round your answer to 2 decimal places.) b. What is the yield to maturity of the coupon bond? (Do not round intermediate calculations. Round your answer to 2 decimal places.) c. Under the expectations hypothesis, what is the expected realized compound yield of the coupon bond? (Do not round intermediate calculations. Round your answer to 2 decimal places.) d. If you forecast that the yield curve in 1 year will be flat at 10.0%, what is your forecast for the expected rate of return on the coupon bond for the 1- year holding period? (Do not round intermediate calculations. Round your answer to 2 decimal places.) a. Price b. Yield to maturity c. Realized compound yield d.…Given only the information provided, which bond would you suspect of having the lowest duration? Coupon Current Price Remaining Term Bond A 5% $ 703.11 20 years Bond B 7% $ 932.05 10 years Bond C 11% $ 1,078.63 3 years Bond D 11% $ 1,296.89 20 years Question 18 options: Bond A Bond B Bond C Bond D