Q4. Assume bond in Muscat stockmarket pays 10 percent annualcoupon rate and has face value of 100OMR. The maturity yield on this bondis 10 percent and maturity date 10years. This bond has modifiedduration of 6.5 years. If the currentmarket price is 120.72. Calculate theexpected change in the bond price ifthe current yield to maturity isexpected to increase to 11.5 percent.

Step 1:We have to calculate the expected change in the price of the bond. We know that bond price…

Answered: Q4. Assume bond in Muscat stock market…

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. Calculate the yield spread of the following floating rate bond: • Annual coupon rate = reference rate + 200 basis points• initial reference rate (annual) = 4%• The bond has a 10-year of term to maturity• Assume the bond’s par value = USD1000• The price of the bond = USD1,032.84 B. Suppose the new reference rate is decreased to 3% two years after the bond is issued. What is the price of the bond then?
Bond prices and maturity dates. Moore Company is about to issue a bond with annual coupon payments, an annual coupon rate of 5%, and a par value of $1,000. The yield to maturity for this bond is 6%. a. What is the price of the bond if it matures in 5, 10, 15, or 20 years? b. What do you notice about the price of the bond in relationship the maturity of the bond? a. What is the price of the bond if it matures in 5 years? $(Round to the nearest cent.) What is the price of the bond if it matures in 10 years? $(Round to the nearest cent.) What is the price of the bond if it matures in 15 years? $(Round to the nearest cent.) What is the price of the bond if it matures in 20 years? $ (Round to the nearest cent.) b. What do you notice about the price of the bond in relationship the maturity of the bond? (Select the best response.) O A. As the time to maturity increases, the price of the bond increases.
The term structure for zero-coupon bonds is currently: Maturity (Years) YTM (%) 1 5.2% 2 6.2 3 7.2 Next year at this time, you expect it to be: Maturity (Years) YTM (%) 1 6.2% 2 7.2 3 8.2 Required: What do you expect the rate of return to be over the coming year on a 3-year zero-coupon bond? Under the expectations theory, what yields to maturity does the market expect to observe on 1- and 2-year zeros at the end of the year? Is the market's expectation of the return on the 3-year bond greater or less than yours?
Bond A has a coupon rate of 10.04 percent, a yield-to-maturity of 14.79 percent, and a face value of $1,000.00; matures in 8 years; and pays coupons annually with the next coupon expected in 1 year. What is (X+Y+Z) if X is the present value of any coupon payments expected to be made in 3 years from today, Y is the present value of any coupon payments expected to be made in 6 years from today, and Z is the present value of any coupon payments expected to be made in 9 years from today? An amount equal to or greater than $82.70 but less than $124.77 O An amount equal to or greater than $141.42 but less than $172.16 O An amount equal to or greater than $124.77 but less than $141.42 O An amount less than $82.70 or a rate greater than $229.36 An amount equal to or greater than $172.16 but less than $229.36
Bond prices and maturity dates. Les Company is about to issue a bond with annual coupon payments, an annual coupon rate of 7%, and a par value of $1,000. The yield to maturity for this bond is 5%. a. What is the price of the bond if it matures in 15, 20, 25, or 30 years? b. What do you notice about the price of the bond in relationship to the maturity of the bond?
Find the duration of a 6% coupon bond making annual coupon payments if it has three years until maturity and a yield to maturity of 7.9%. What is the duration if the yield to maturity is 11.9%? (Do not round intermediate calculations. Round your answers to 4 decimal places.) YTM 7.9% YTM 11.9% YTM Duration
Calculate the price of a 10 year, $1000 par value bond that makes semiannual payments, has a coupon rate of 12%. Calculate the price using a yield to maturity of 13% and illustrate it on a timeline. Is the bond traded at premium, par or discount?
You find the following Treasury bond quotes. To calculate the number of years until maturity, assume that it is currently May 2022. All of the bonds have a par value of $1,000 and pay semiannual coupons. Rate ?? 6.252 6.163 Maturity Month/Year May 36 May 41 May 51 Bid 103.5462 104.4952 ?? Asked 103.6340 104.6409 ?? Change Ask Yield +.3015 2.329 +.4293 +.5405 ?? 4.031 In the above table, find the Treasury bond that matures in May 2036. What is the coupon rate for this bond? Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.
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
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H3. The face value of a bond is $1000. This bond has a coupon rate of 6% compounded semi-annually with a prevailing interest rate of 6.5% compounded semi-annually. If this is a 10-year bond, what is this bond valued at initially?
You find the following Treasury bond quotes. To calculate the number of years until maturity, assume that it is currently May 2022. All of the bonds have a par value of $1,000 and pay semiannual coupons. Rate ?? 6.152 6.153 Maturity Month/Year May 35 May 38 May 44 Bid 103.4586 104.4926 ?? Yield to maturity Asked 103.5314 % 104.6383 ?? Change Ask Yield +.3274 5.959 ?? 3.991 In the above table, find the Treasury bond that matures in May 2038. What is your yield to maturity if you buy this bond? Note: Do not round Intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16. +.4269 +.5379

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