The cash price of a $1,000 bond that matures in exactly 18 months is $1001.74. Current continuously compounded spot (zero) interest rates are given in the table below. Maturity (months) Spot Rate (% p.a.) 3.30 3.60 ? 4.05 If the bond pays coupons semi-annually at the rate of 4% p.a., what is the missing spot (zero) rate? 6 12 18 24

The cash price of a $1,000 bond that matures in exactly 18 months is $1001.74. Current continuously compounded spot (zero) interest rates are given in the table below. Maturity (months) Spot Rate (% p.a.) 3.30 3.60 ? 4.05 If the bond pays coupons semi-annually at the rate of 4% p.a., what is the missing spot (zero) rate? 6 12 18 24

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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Treasury securities that mature in 6 years currently have an interest rate of 7.00 percent. Inflation is expected to be 5 percent in each of the next three years and 6 percent each year thereafter. The maturity risk premium is estimated to be 0.10% × (t-1), where t is equal to the maturity of the bond (i.e., the maturity risk premium of a one-year bond is zero). The real risk-free rate is assumed to be constant over time. What is the real risk-free rate of interest?
Consider a 2-year U.S. treasury bond that pays a coupon of 10 in one year from now and a coupon and principal of 110 in two years from now. If the expected yield-to-maturity of the bond increases from 10% to 15%, then the price of the bond changes from _________. 100 to 91.87 109.09 to 104.34 90.09 to 83.18 The interest rate of a bond is fixed and so the price never changes.
The following table shows some data for three bonds. In each case, the bond has a coupon of zero. The face value of each bond is $1,000. Bond Price Maturity (Years) Yield to Maturity A $ 230 20 B с 230 17 10% 9 What is the yield to maturity of bond A? Note: Do not round intermediate calculations. Enter your answer as a percent rounded to 3 decimal places. Assume annual compounding. What is the maturity of B? Note: Do not round intermediate calculations. Round your answer to 2 decimal places. Assume annual compounding. What is the price of C? Note: Do not round intermediate calculations. Round your answer to 2 decimal places. Assume annual compounding.
A bond that matures in 10 years has a $1,000 par value. The annual coupon interest rate is 8 percent and the market's required yield to maturity on a comparable-risk bond is 13 percent. What would be the value of this bond if it paid interest annually? What would be the value of this bond if it paid interest semiannually? Question content area bottom Part 1 a. The value of this bond if it paid interest annually would be $enter your response here.
A bond has $ 94000 face value and the coupon rate of the bond is 3.4 % (APR). The YTM of the bond is 6.8 %. What is the fair price of the bond assuming that the maturity of the bond is 8 years and the bond pays coupon in every 6 months? (Give the answer in round numbers without presenting a $sign.) Answer: Time left 0:06:54 Next page
Bond A pays annual interest, has 6 percent annual coupons, $1,000 face value, and currently has 6 percent yields to maturity. The bond has 12 years to maturity. If the market rate of interest rises unexpectedly to 7 percent, what is the percentage change in the price of Bond A? A) -3.39% B) -5.73% C) -6.08% D) -7.94%
You observe two most recently issued securities: 6-month T-Bill (zero coupon) with yield 5.25% p.a., and 2-year T-Note with coupon rate of 6% p.a. are selling at par of 100. All bonds in the market are semi-annual payments. Using this information to answer questions 19-20. Which of the following information would be incorrect?A. The current 6-month spot rate is 5.25% p.a.B. The yield to maturity of 2-year T-note is 6% p.a.C. The correct market price of 1-year Treasury note with par of 100 and coupon rate of 5.5% should be about 100.D. The spot rate in 1.5-year’s time should be 5.75% p.a.
(Yield to maturity) A bond's market price is $825. It has a $1,000 par value, will mature in 6 years, and has a coupon interest rate of 11 percent annual interest, but makes its interest payments semiannually. What is the bond's yield to maturity? What happens to the bond's yield to maturity if the bond matures in 12 years? What if it matures in 3 years? a. The bond's yield to maturity if it matures in 6 years is b. The bond's yield to maturity if it matures in 12 years is c. The bond's yield to maturity if it matures in 3 years is %. (Round to two decimal places.) %. (Round to two decimal places.) %. (Round to two decimal places.)
Bond P is a premium bond with a 10 percent coupon. Bond D is a 6 percent coupon bond currently selling at a discount. Both bonds make annual payments, have a YTM of 8 percent, and have five years to maturity. (Assume par value of K1,000)(i) What is the current yield for Bond P and Bond D?(ii) If interest rates remain unchanged, what is the expected capital gains yield over the next year for Bond P? For Bond D?(iii)Explain your answers and the interrelationship among the various types of yields.
A bond pays annual interest. Its coupon rate is 7.0%. Its value at maturity is $1,000. It matures in 4 years. Its yield to maturity is currently 4.0%. The modified duration of this bond is ______ years. 3.65 4.00 3.51 3.30
A bond that matures in 9years has a $1,000 par value. The annual coupon interest rate is 14 percent and the market's required yield to maturity on a comparable-risk bond is 16 percent. A. What would be the value of this bond if it paid interest annually? (Round to the nearest cent) B. What would be the value of this bond if it paid interest semiannually? (Round to the nearest two decimnal places)
Calculate the value of a 2-year 3.5% annual pay bond given the interest rate below. What is the implied 3-year spot rate? Time Period Forward Rate z1 0.80% 1f1 1.12% 1f2 3.94% 1f3 3.28% 1f4 3.14%

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