The following table contains annual returns on stocks and Treasury bonds for 20 years.Mkt-RF 30-day T-bills 10-year T-bondsLarge Stocks14.4891-11.712000 -17.62001 -15.22002 -22.762003 30.752004 10.722005 3.092006 10.62007 1.045.893.781.631.021.202.964.794.672008 -38.34 1.472009 28.26 0.102010 17.37 0.124.030214.66411.27785.18623.1032.27139.643117.6664-5.82787.4457-11.42-21.1331.7711.926.0515.395.71-36.8728.3617.49 2011 0.442012 16.282013 35.22014 11.72015 0.072016 13.32017 21.52018 -6.930.040.060.030.020.010.190.791.7116.60153.5862-6.902510.15121.06650.70392.80340.04260.4816.3435.2311.720.0813.4922.29-5.222019 28.28 2.158.2622Please use Microsoft Excel to analyze the risk-return trade-off that would have characterized portfolios constructed from large stocks and long-term Treasury bonds overthe 20 years.30.431. What were the average rate of return and standard deviation of each asset?2. What was the correlation coefficient of their annual returns?3. What would have been the average return and standard deviation of portfolios with differing weights in the two assets? For example, consider weights in stocks startingat zero and incrementing by 0.10 up to a weight of 1.4. What were the average return and standard deviation of the minimum-variance combination of stocks and bonds?

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The following table contains annual returns on stocks and Treasury bonds for 20 years. Mkt-RF 30-day T-bills 10-year T-bonds Large Stocks 5.89 14.4891 -11.71 2000 -17.6 2001 -15.2 3.78 2002 -22.76 1.63 2003 30.75 2004 10.72 2005 3.09 1.02 1.20 2.96 2006 10.6 4.79 2007 1.04 4.67 2008 -38.34 1.47 2009 28.26 0.10 2010 17.37 0.12 4.0302 14.6641 1.2778 5.1862 3.103 2.2713 9.6431 17.6664 -5.8278 7.4457 -11.42 -21.13 31.77 11.92 6.05 15.39 5.71 -36.87 28.36 17.49

The following table contains annual returns on stocks and Treasury bonds for 20 years. Mkt-RF 30-day T-bills 10-year T-bonds Large Stocks 5.89 14.4891 -11.71 2000 -17.6 2001 -15.2 3.78 2002 -22.76 1.63 2003 30.75 2004 10.72 2005 3.09 1.02 1.20 2.96 2006 10.6 4.79 2007 1.04 4.67 2008 -38.34 1.47 2009 28.26 0.10 2010 17.37 0.12 4.0302 14.6641 1.2778 5.1862 3.103 2.2713 9.6431 17.6664 -5.8278 7.4457 -11.42 -21.13 31.77 11.92 6.05 15.39 5.71 -36.87 28.36 17.49

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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Company A's balance sheet as of today is as follows: Long-term debt (bonds, at par) Preferred stock Common stock ($10 par) Retained earnings Total debt and equity $10,000,000 2,000,000 10,000,000 4,000,000 $26,000,000 The bonds have a 4.0% coupon rate, payable semiannually, and a par value of $1,000. They mature exactly 10 years from today. The yield to maturity is 12%, so the bonds now sell below par. What is the current market value of the firm's debt? a. $5,412,032 b. $5,479,822 c. $5,751,032 d. $5,549,671 e. $5,249,841
If 10-year T-bonds have a yield of 4.0%, 10-year corporate bonds yield 7.6%, the maturity risk premium on all 10-year bonds is 1.3%, and corporate bonds have a 0.23% liquidity premium versus a zero liquidity premium for T-bonds, what is the default risk premium on the corporate bond? Round 2 decimal places
AEP issued 20-year 7.4% annual coupon bonds at their par value of $1,000 one year ago. Today, the market interest rate on these bonds is 5.5%. What is the price of the bonds today? $1,196.13 $1,220.55 $1,281.57 $1,000.85 $1,013.05
P6-20 Bond valuation: Annual interest Calculate the value of each of the bonds shown in the following table, all of which pay interest annually. Bond A B C D E Par value $1,000 1,000 100 500 1,000 Coupon rate 11% 8 9 6 7 Years to maturity 20 16 8 13 10 Required return 12% 8 7 8 5
Most corporate bonds make coupon payments Question 8 options: a) annually b) semi-annually c) quarterly d) monthly e) weekly
Grossnickle Corporation issued 20-year, noncallable, 7.2% annual coupon bonds at their par value of $1,000 one year ago. Today, the market interest rate on these bonds is 5.6%. What is the current price of the bonds, given that they now have 19 years to maturity? a. $1,237.42 b. $1,184.25 c. $1,194.73 d. $1,230.68 e. $1,189.63
For items 1-3: The Peninsula Corporation issued a new series of bonds on January 1, 1992. The bonds were sold at par (P1,000), had a 12% coupon, and mature in 30 years, on December 31, 2021. Coupon payments are made semiannually (on June 30 and December 31). What was the YTM on January 1, 1992? What was the price of the bonds on January 1, 1997, five (5) years later, if interest rates had fallen to 10%? Find the current yield, capital gains yield, and total return on January 1, 1997, given the price as determined in part
Grossnickle Corporation issued 25-year, noncallable, 6.9% annual coupon bonds at their par value of $1,000 one year ago. Today, the market interest rate on these bonds is 4.5%. What is the current price of the bonds, given that they now have 24 years to maturity? a. $1,392.90 b. $1,401.92 c. $1,347.89 d. $1,363.52 e. $1,355.88
The following table lists several corporate bonds issued during a particular quarter. Company AT&T Bank Of America General Electric Goldman Sachs Verizon Wells Fargo Time to Maturity (years) 10 10 2 3 8 7 Annual Rate (%) 3.40 5.00 5.25 5.15 4.15 4.50 If the General Electric bonds you purchased had paid you a total of $6,630 at maturity, how much did you originally invest? (Round your answer to the nearest dollar.) $
Consider a 9-year, $1,000 par value, 12% annual-pay bond that is currently trading at a flat price of $888. The capital gains yield (CGY) is closest to A. 0.7745%. B. 0.4672%. C. 0.3505%. D. 0.0185%.
Grossnickle Corporation issued 20-year, noncallable, 8.0% annual coupon bonds at their par value of $1,000 one year ago. Today, the market interest rate on these bonds is 6.0%. What is the current price of the bonds, given that they now have 19 years to maturity? a. $1,235.28 b. $1,229.40 c. $1,223.16 d. $1,276.72 e. $1,284.45
4. Compute the four-year spot rate using the information below about two 4-year annual coupon bonds: Face value Face value Price Bond I Bond II $800 5% $575 $1,000 6% $723

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