The current zero-coupon yield curve of semi-annually compounded rates for risk- free bonds is as follows: Finish attempt MATURITY 0.5 Years 1.0 Years 1.5 Years 2.0 Years 2.5 Years 3.0 Years 3.5 Years 4.0 Years Yield (APR) 2.00% 3.40% 5.00% 7.20% 9.80% 10.80% 11.40% 12.20% A) What is the price today of a risk-free, 14.50% semi-annual coupon bond with a face value of $1, 800 that has exactly 2.5 years remaining until it matures? Assume that the bond has just paid its most recent coupon. The price of the bond is $ (Round your answer to 2 decimal places) today. Assume that the yield curve suddenly shifts to the new values below upon the release of some important economic news: MATURITY 0.5 Years Yield (APR) 3.20% 5.40% 1.0 Years 1.5 Years 6.00% 2.0 Years 2.5 Years 3.0 Years 3.5 Years 4.0 Years 4.70% 5.00% 9.60% 13.00% 13.80% B) By what percentage should the price of that same bond suddenly increase (+) or decrease (-) in response to the change in the yield curve? The price of the bond should change by (Round your answer to 2 decimal places) % when the yield curve shifts. (If your answer is a decrease, include the "sign. e.g. -12.34%)
The current zero-coupon yield curve of semi-annually compounded rates for risk- free bonds is as follows: Finish attempt MATURITY 0.5 Years 1.0 Years 1.5 Years 2.0 Years 2.5 Years 3.0 Years 3.5 Years 4.0 Years Yield (APR) 2.00% 3.40% 5.00% 7.20% 9.80% 10.80% 11.40% 12.20% A) What is the price today of a risk-free, 14.50% semi-annual coupon bond with a face value of $1, 800 that has exactly 2.5 years remaining until it matures? Assume that the bond has just paid its most recent coupon. The price of the bond is $ (Round your answer to 2 decimal places) today. Assume that the yield curve suddenly shifts to the new values below upon the release of some important economic news: MATURITY 0.5 Years Yield (APR) 3.20% 5.40% 1.0 Years 1.5 Years 6.00% 2.0 Years 2.5 Years 3.0 Years 3.5 Years 4.0 Years 4.70% 5.00% 9.60% 13.00% 13.80% B) By what percentage should the price of that same bond suddenly increase (+) or decrease (-) in response to the change in the yield curve? The price of the bond should change by (Round your answer to 2 decimal places) % when the yield curve shifts. (If your answer is a decrease, include the "sign. e.g. -12.34%)
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
Related questions
Question
Transcribed Image Text:The current zero-coupon yield curve of semi-annually compounded rates for risk-
free bonds is as follows:
Finish attempt
MATURITY
0.5 Years 1.0 Years
1.5 Years
2.0 Years
2.5 Years
3.0 Years
3.5 Years
4.0 Years
Yield (APR)
2.00%
3.40%
5.00%
7.20%
9.80%
10.80%
11.40%
12.20%
A) What is the price today of a risk-free, 14.50% semi-annual coupon bond with a
face value of $1, 800 that has exactly 2.5 years remaining until it matures?
Assume that the bond has just paid its most recent coupon.
The price of the bond is $
(Round your answer to 2 decimal places)
today.
Assume that the yield curve suddenly shifts to the new values below upon the
release of some important economic news:
MATURITY
0.5 Years
Yield (APR)
3.20%
5.40%
1.0 Years 1.5 Years
6.00%
2.0 Years
2.5 Years
3.0 Years
3.5 Years
4.0 Years
4.70%
5.00%
9.60%
13.00%
13.80%
B) By what percentage should the price of that same bond suddenly increase (+) or
decrease (-) in response to the change in the yield curve?
The price of the bond should change by
(Round your answer to 2 decimal places)
% when the yield curve shifts.
(If your answer is a decrease, include the "sign. e.g. -12.34%)
AI-Generated Solution
AI-generated content may present inaccurate or offensive content that does not represent bartleby’s views.
Unlock instant AI solutions
Tap the button
to generate a solution
Recommended textbooks for you
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
Foundations Of Finance
Finance
ISBN:
9780134897264
Author:
KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:
Pearson,
Fundamentals of Financial Management (MindTap Cou…
Finance
ISBN:
9781337395250
Author:
Eugene F. Brigham, Joel F. Houston
Publisher:
Cengage Learning
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Finance
ISBN:
9780077861759
Author:
Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor
Publisher:
McGraw-Hill Education