Q a) A semiannual-coupon bond has a coupon rate of 6.5%, with a par value of RM 1000. The bond has remaining 8 years to maturity and a yield to maturity of 6.15%. Estimate the likely percentage change in this bond price if the market yield suddenly increases to 7.5%? b) You have collected the information of yield curve as shown below: Maturity 1-year 2-year 3-year 4-year 5-year Yield 6.20% 6.35% 6.50% 6.75% 6.80% Assuming that the pure expectations theory is the correct theory of the term structure, forecast the (i)the 3-year interest rate next year; and (ii)annual interest rate after 2 years c) Briefly discuss four (4) possible factors that might affect your forecast accuracy in part (b) above.
Q a) A semiannual-coupon bond has a coupon rate of 6.5%, with a par value of RM 1000. The bond has remaining 8 years to maturity and a yield to maturity of 6.15%. Estimate the likely percentage change in this bond price if the market yield suddenly increases to 7.5%? b) You have collected the information of yield curve as shown below: Maturity 1-year 2-year 3-year 4-year 5-year Yield 6.20% 6.35% 6.50% 6.75% 6.80% Assuming that the pure expectations theory is the correct theory of the term structure, forecast the (i)the 3-year interest rate next year; and (ii)annual interest rate after 2 years c) Briefly discuss four (4) possible factors that might affect your forecast accuracy in part (b) above.
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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a) A semiannual-coupon bond has a coupon rate of 6.5%, with a par value of RM
1000. The bond has remaining 8 years to maturity and a yield to maturity of
6.15%. Estimate the likely percentage change in this bond price if the market
yield suddenly increases to 7.5%?
b) You have collected the information of yield curve as shown below:
Maturity 1-year 2-year 3-year 4-year 5-year
Yield 6.20% 6.35% 6.50% 6.75% 6.80%
Assuming that the pure expectations theory is the correct theory of the term
structure, forecast the
(i)the 3-year interest rate next year; and
(ii)annual interest rate after 2 years
c) Briefly discuss four (4) possible factors that might affect your forecast accuracy in
part (b) above.
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