Suppose you bought a five-year zero-coupon Treasury bond for $800 per $1000 face value. Suppose after 3 years, the yield to maturity on comparable bonds declines to 3%. Calculate the holding period return if you sell the bond at that time.
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Suppose you bought a five-year zero-coupon Treasury bond for $800 per $1000 face value. Suppose after 3 years, the yield to maturity on comparable bonds declines to 3%. Calculate the holding period return if you sell the bond at that time.
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- QUESTION 7 Consider the market for a bond which has a face value of $2,000, pays a coupon of $100, and matures in 1 year (that is, you will get the face value and one coupon payment next year). Suppose the demand for such bonds is given by P=4,000-2Q, and that the supply of such bonds is given by P=1,000+Q. What is the yield to maturity if one were to purchase the bond at the equilibrium price? 5% .05% 10% .10%Question A .Consider a 2-year, risk-free bond with a coupon rate of 6% (annual coupons) and a face value of $1,000. If the yield on the above bond is 6%: a. What is the Macaulay duration of this bond? b. If the yield increases to 7% immediately, what does the duration approximation predict will be the percentage change in the bond price? c. If the yield decreases to 5% instead, what is the approximate percentage change in the bond price implied by the bond’s duration? d. After receiving the first coupon payment in year 1, the yield increases to 7% and you decide to sell the bond. What is your annualized HPR? Full explain this question and text typing work only We should answer our question within 2 hours takes more time then we will reduce Rating Dont ignore this lineDog Suppose you purchase a 10-year bond with 6.6% annual coupons. You hold the bond for four years, and sell it immediately after receiving the fourth coupon. If the bond's yield to maturity was 5.4% when you purchased and sold the bond, a. what cash flows will you pay and receive from your investment in the bond per $100 face value? b. what is the annual rate of return of your investment?
- note:- give me answer( d) explan answer Suppose you purchase a 30-year, zero-coupon bond with a yield to maturity of 6%. You hold the bond for five years before selling it. a. If the bond's yield to maturity is 6% when you sell it, what is the internal rate of return of your investment? b. If the bond's yield to maturity is 7% when you sell it, what is the internal rate of return of your investment? c. If the bond's yield to maturity is 5% when you sell it, what is the internal rate of return of your investment? d. Even if a bond has no chance of default, is your investment risk free if you plan to sell it before it matures? Explain. Note: Assume annual compounding.5 The YTM on a bond is the interest rate you earn on your investment if interest rates don't change. If you actually sell the bond before it matures, your realized return is known as the holding period yield (HPY). a. Suppose that today you buy an annual coupon bond with a coupon rate of 8.2 percent for $845. The bond has 10 years to maturity and a par value of $1,000. What rate of return do you expect to earn on your investment? Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16. b-1. Two years from now, the YTM on your bond has declined by 1 percent, and you decide to sell. What price will your bond sell for? Note: Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16. b-2. What is the HPY on your investment? Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16. eBook a. Rate of return b-1. Price b-2. Holding…Question 2 a. A bond that matures in one year has a $500 face value and a $60 coupon. What is the price of the bond if the interest rate is 6 percent and the bond was purchased by the present owner for $450? b. A bond that matures in two years has a face value equal to F and a coupon equal to R. Suppose that the yield to maturity, i, is such that i = ( R / F ). The price of the bond equals... F F/(1+i) F(1+i) F/i Answer both otherwise don't do that I will Dounvote
- 2c. c. Consider two zero coupon bonds in which you receive $100 at the maturity date, one maturing in 3 years and one maturing in 5 years. Both are currently priced to yield 6 percent. Calculate the current market value of each bond. Now suppose the yield to maturity rises to 9 percent. Calculate the percent change in the price of each bond as the yield went from 6 to 9.Question 6 Consider a 10-year zero coupon bond with a face value F = 100 000. The risk free rate is 0.005. The credit spread for the bond is 125 basis points. Compute the following at t 0: - The default probability of the bond. - The value of the bond if there is no recovery on a default. - The value of the bond if there is a recovery of 15%. - The value of the bond if there were no possibility of default.QUESTION 2 Consider a bond with a face value of $2,000 that pays a coupon of $150 for 10 years. Suppose the bond is purchased at $500, and can be resold next year for $400. What is the yield to maturity of the bond? A. 30% B. 0% C. 35.4% D. 100.2%
- 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…5. (a) Suppose that you have purchased a 5-year zero-coupon bond with face value of$1000 and a price of $800. If you hold the bond to maturity, what is your annualrate of return? (b) Now suppose you have purchased a 5-year bond with face value of $1000, a 10%annual coupon, and a price of $900. Assuming that you hold the bond to maturity,is the IRR greater or less than the return on the bond in part (a)?-7 The YTM on a bond is the interest rate you earn on your investment if interest rates don't change. If you actually sell the bond before it matures, your realized return is known as the holding period yield (HPY). a. Suppose that today you buy a bond with an annual coupon of 12 percent for $1,140. The bond has 19 years to maturity. What rate of return do you expect to earn on your investment? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) b- Two years from now, the YTM on your bond has declined by 1 percent and you 1. decide to sell. What price will your bond sell for? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b- What is the HPY on your investment? (Do not round intermediate calculations and 2. enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) a. Expected rate of retum. b-1. Bond price b-2. HPY %