Saved Bond P is a premium bond with a coupon rate of 9 percent. Bond D has a coupon rate of 5 percent and is currently selling at a discount. Both bonds make annual payments, have a par value of $1,000, a YTM of 7 percent, and 15 years to maturity. a. What is the current yield for Bond P and Bond D? (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) b. If interest rates remain unchanged, what is the expected capital gains yield over the next year for Bond P and Bond D? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.)

Saved Bond P is a premium bond with a coupon rate of 9 percent. Bond D has a coupon rate of 5 percent and is currently selling at a discount. Both bonds make annual payments, have a par value of $1,000, a YTM of 7 percent, and 15 years to maturity. a. What is the current yield for Bond P and Bond D? (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) b. If interest rates remain unchanged, what is the expected capital gains yield over the next year for Bond P and Bond D? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.)

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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Calculate YTC using a financial calculator by entering the number of payment periods until call for N, the price of the bond for PV, the interest payments for PMT, and the call price for FV. Then you can solve for 1/YR YTC. Again, remember you need to make the appropriate adjustments for a semiannual bond and realize that the calculated 1/YR is on a periodic basis so you will need to multiply the rate by 2 to obtain the annual rate. In addition, you need to make sure that the signs for PMT and FV are identical and the opposite sign is used for PV; otherwise, your answer will be incorrect. A company is more likely to call its bonds if they are able to replace their current high-coupon debt with less expensive financing. A bond is more likely to be called if its price is above par-because this means that the going market interest rate is less than its coupon rate. Quantitative Problem: Ace Products has a bond issue outstanding with 15 years remaining to maturity, a coupon rate of 8.4%…
You find a bond with 27 years until maturity that has a coupon rate of 9 percent and a yield to maturity of 10 percent. What is the Macaulay duration? The modified duration? Note: Do not round intermediate calculations. Round your answers to 3 decimal places.
Calculate the purchase price of the following bonds. Indicate whether the bonds are priced at a discount, at par or at a premium. Give your answers in dollars and cents to the nearest cent. Face Value Coupon Rate Years to Maturity Market Rate a) $100 r = 6.75% 5 j2 = 6.75% b) $1,000 r = 8% 11 j2 = 6.25% c) $10,000 r = 7% 20 j2 = 8.75% Quoted coupon rates and market rates are nominal annual rates compounded semi-annually. a)Price = $ This bond is priced at:a discountpara premium b)Price = $ This bond is priced at:a discountpara premium c)Price = $ This bond is priced at:a discountpara premium
Do not use excel, use formulas to compute the question You have two bonds, Bond A and bond B: A 3-year zero-coupon bond with face value of $1,000 with a yield-to-maturity of 4%. A 6-year bond with an annual coupon payment C (to be paid out starting a year from now), a face value of $1,000 and yield-to-maturity of 5%. Assume that compounding takes place annually. If the price of Bond A is equal to the price of Bond B, what is the value of Bond B’s coupon payments (C)?
Using semiannual compounding, find the prices of the following bonds: a. A 9.8%, 15-year bond priced to yield 7.7%. b. A 7.3%, 10-year bond priced to yield 9.4%. c. A 11.6%, 20-year bond priced at 9.5%. Repeat the problem using annual compounding. Then comment on the differences you found in the prices of the bonds. a1. Using semiannual compounding, the price of the bond is $nothing. (Round to the nearest cent.)
Bond J has a coupon of 6.4 percent. Bond K has a coupon of 10.4 percent. Both bonds have 20 years to maturity and have a YTM of 7.8 percent. a. If interest rates suddenly rise by 1.2 percent, what is the percentage price change of these bonds? Note: A negative value should be indicated by a minus sign. Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places. Bond J Bond K %A in Price % % b. If interest rates suddenly fall by 1.2 percent, what is the percentage price change of these bonds? Note: Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places. %A in Price Bond J % Bond K %
Both Bond A and Bond B have 6.2 percent coupons and are priced at par value. Bond A has 6 years to maturity, while Bond B has 15 years to maturity. a. If interest rates suddenly rise by 1 percent, what is the percentage change in price of Bond A and Bond B? (A negative value should be indicated by a minus sign. Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places.) b. If interest rates suddenly fall by 1 percent instead, what would be the percentage change in price of Bond A and Bond B? (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places.)
A bond with a maturity of 12 years sells for $1,068. If the coupon rate is 10.2 percent, what is the yield to maturity of the bond? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)
7. Given the two bonds below, answer the following questions. Bond Bond A Coupon Rate B 5% Par/Face/Princ $1000 Years to Maturity 2 5% $1000 a. If the Yield to maturity of the two bonds is 5%, what is the price of both bonds. b. Find the Modified Duration of both bonds. c. Find the Modified Convexity of both bonds. d. Estimate the price of bond B using the Tayor Series Expansion if interest rates rise to 6% for the Yield to Maturity. 3
Using semiannual compounding, find the prices of the following bonds: a. A 9.4%, 15-year bond priced to yield 7.2%. b. A 7.3%, 10-year bond priced to yield 9.5%. c. A 12.8%, 20-year bond priced at 10.6%. Repeat the problem using annual compounding. Then comment on the differences you found in the prices of the bonds. a1. Using semiannual compounding, the price of the bond is $. (Round to the nearest cent.) b1. Using semiannual compounding, the price of the bond is $. (Round to the nearest cent.) c1. Using semiannual compounding, the price of the bond is $. (Round to the nearest cent.) a2. Using annual compounding, the price of the bond is $ b2. Using annual compounding, the price of the bond is $ c2. Using annual compounding, the price of the bond is $. (Round to the nearest cent.) Comment on the differences you found in the prices of the bonds. (Select the best answer below.) (Round to the nearest cent.) (Round to the nearest cent.) Bonds selling at a premium sell at lower prices when…
Bond j has a coupon of 6.2 percent. Bond k has a coupon of 10.2 percent. Both bonds have 20 years to maturity and have a YTM of 6.9 percent. a. If interest rates suddenly rise by 1 percent, what is the percentage price change of these bonds? Note: A negative value should be indicated by a minus sign. Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places. \table[[,%delta in Price],[Bond j,,%
A Treasury bond that settles on October 18, 2019, matures on March 30, 2038. The coupon rate is 6.20 percent, and the bond has a yield to maturity of 5.71 percent. What are the Macaulay duration and modified duration? (Use the duration functions in Excel to solve the problem. Do not round intermediate calculations. Round your answers to 4 decimal places.) Macaulay duration Modified duration

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