Problem 8-14 Using Treasury QuotesLocate the Treasury bond in Figure 8.5 maturing in August 2040. Assume a par value of$20,000.a. What is its coupon rate? (Enter your answer as a percent rounded to 3 decimalplaces, e.g., 32.161.)b. What is its bid price in dollars? (Do not round intermediate calculations and roundyour answer to 2 decimal places, e.g., 32.16.)c. What was the previous day's asked price in dollars? (Do not round intermediatecalculations and round your answer to 2 decimal places, e.g., 32.16.)a. Coupon rateb. Bid pricec. Previous day's asked price%

Part A: Coupon RateThe coupon rate of a Treasury bond is the annual interest rate paid by the…

Answered: Problem 8-14 Using Treasury Quotes…

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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QUESTION 3 You are considering three investments: Investment 1: Bond that is selling in the market at $1,200. The bond has a $1,000 par value, pays interest at 15 percent, and is scheduled to mature in 10 years. For bonds of this risk class, you believe that a 12 percent rate of return should be required. Investment 2: Preferred stock ($100 par value) that sells for $90 and pays an annual dividend of $15. Your required rate of return for this stock is 15 percent. Investment 3: Common stock ($35 par value) that recently paid a $4 dividend. The firm’s return on equity is 12.3%. The firm’s earning per share was $6.00 and it paid $3.20 in dividends per share. The stock is selling for $30, and you think a reasonable required rate of return for the stock is 18 percent. b.Which investment(s) should you accept? Why? c. What is the importance of valuation of bond and stock to the investor?
Problem 6-23 Real Returns (LO3) Suppose that you buy a TIPS (inflation-indexed) bond with a 2-year maturity and a (real) coupon of 4.4% paid annually. If you buy the bond at its face value of $1,000, and the inflation rate is 8.60% in each year. a. What will be your cash flow in year 1? Note: Do not round intermediate calculations. Round your answer to 2 decimal places. Cash flow b. What will be your cash flow in year 2? Note: Do not round intermediate calculations. Round your answer to 2 decimal places. Cash flow c. What will be your real rate of return over the two-year period? Note: Enter your answer as a percent rounded to 1 decimal place.
Question 4 (i) What is the approximate annualized yield on a 6-month Treasury bill with a face value of $1000 that is sold at $970 in the primary market? (ii) A 5-year Treasury bond (TBOND1) is sold on the market one day at $1000 with an annual coupon of $60. The following day bad news hits the market and a new 5-year Treasury bond is sold on the market at an $80 annual coupon. What is the approximate new secondary market price of TBOND1? (iii) Write down an equation for the three main components of the nominal long term interest rate on a bond, clearly explaining what each symbol stands for.
D & R A1 8 - 1 Question 8. Cheapest-to-Deliver Bond Today is July 1. You hold a November Treasury bond futures contract with a price of 92:15 (i.e., 92 plus [15/32]), with a delivery date of November 15 in the same year. You have identified the two bonds below that could be used for delivery against the futures contract: Bond A Bond B Maturity 26.5 years 31 years Coupon rate 5% 8.5% Asking price 93:2 144:13 Coupon dates April 15, October 15 June 15, December 15 Callable? No No Assume that the next year is not a leap year, and that the market repo rate is 5.50%. Find the conversion factors for Bond A and Bond B. Use the downloadable Excel spreadsheet on the Chicago Mercantile Exchange (CME) website: http://www.cmegroup.com/trading/interest-rates/us-treasury-futures-conversion-factor-lookup-tables.html.
Q 20 Calculate the price of a 5.7 percent coupon bond with 22 years left to maturity and a market interest rate of 6.5 percent. (Assume interest payments are semiannual.) (Do not round intermediate calculations. Round your final answer to 2 decimal places.) BOND PRICE_______ Is this a discount or premium bond?multiple choice premium bond discount bond
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Question 5 0/1 Oscorp has just issued its Norman Special Long Bond. The bonds have a maturity of 25 years, a coupon rate of 0.50% and pay the coupon on a semi-annual basis. The face value of the bond is $1000. The bonds are trading at a YTM of 5.00%. What is the current yield of these? (Enter your answer as a % accurate to two decimal points. DO NOT add a % symbol or any extraneous punctuation.)
You invest $ 4,060 in an account today. You make no additional deposits into the account. One year from today there is $ 5,140 in the account. What is the nominal interest rate that you earned on your money? (Record your answer as a percent rounded to 1 decimal place; for example, record .527945 = 52.8% as 52.8). Your Answer:
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estion list Question 7 K Refer to the bond listing table below to determine the daily high of the KFT.GX bond? Click the icon to view the bond listing from the table below. The daily high of the bond is % (Type an integer or a decimal.) Bond Listing from Wall Street Journal Online 1 2 3 4 5 6 7 8 9 Issuer Name CITIGROUP Symbol CHRY Coupon Maturity Rating Moody's/S&P/ Fitch Low 8.500% GENERAL GEHMX 5.500% May 2019 Jan 2020 A3/A/A+ Aa2/AA+/- - High 119.268 116.615 117.733 0.448 105.307 102.374 103.097 -0.028 Last Change ELECTRIC CAPITAL KRAFT FOODS KFT.GX 5.375% BANK OF BAC ICB 7.625% AMERICA ANHEUSER- BUD ID 5.375% BUSCH COMCAST CORP CMCD.GC 5.150% Mar 2020 Baa1/BBB+/BBB+ GOLDMAN GS.IAR 5.375% Mar 2020 A1/A/A+ Feb 2020 Baa2/BBB-/BBB- Jun 2019 A2/A/A+ Jan 2020 Baa2/BBB+/- - 106.081 101.999 103.411 0.687 113.172 111.839 112.847 0.283 104.693 104.061 104.526 -0.466 104.832 100.923 101.225 0.441 -0.592 99.750 95.636 96.642 SACHS GP BANK OF BAC IOP 4.500% Apr 2019 A2/A/A+ 101.750 99.288…

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