The one-year spot rate is 3% and the forward rates stated with an annual periodicity of 1 for years1, 2, and 3 one year from now are 3.82017%, 5.55162%, and 5.78901%, respectively. Using thisinformation, calculate the yield-to-maturity of a bond that pays an annual coupon of 7% and has aremaining term of three years.4.60%O4.06%4.32%

One-year spot rate3%Forward for year 13.82017%Forward for year 25.55162%Forward rate for year…

The one-year spot rate is 3% and the forward rates stated with an annual periodicity of 1 for years 1, 2, and 3 one year from now are 3.82017%, 5.55162 %, and 5.78901% , respectively. Using this nformation, calculate the yield-to-maturity of a bond that pays an annual coupon of 7% and has a remaining term of three years. 4.60% O4.06% O 4.32%

The one-year spot rate is 3% and the forward rates stated with an annual periodicity of 1 for years 1, 2, and 3 one year from now are 3.82017%, 5.55162 %, and 5.78901% , respectively. Using this nformation, calculate the yield-to-maturity of a bond that pays an annual coupon of 7% and has a remaining term of three years. 4.60% O4.06% O 4.32%

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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An annual coupon bond that matures in 3 years and pays a 4% coupon rate is currently valued at 97.564. 1- year and 2-year spot rates are 3.5% and 4.5%, respectively. Compute for the implied 3-year spot rate.
Calculate the duration of a coupon bond with the following features. What general conclusion can we make about the duration of coupon bonds relative to their time to maturity? Face value of $1000 Five years to maturity Coupon rate of 11%, paid semi-annually Current price of $970 (Hint: The effective annual yield should be 12.1604%.)
Suppose that the current 6-month, 1-year, 1.5-year and 2-year interest rates are 2.2%,3%, 3.5% and 3.75%, respectively. a) Calculate the prices of a 1-year and 2-year Treasury bonds. In each case, assumethe face value of £100 and the coupon rate of 5% per annum and that coupons arepaid semi-annually. Assume continuous compounding. Compare the obtainedresults. Are they consistent with your expectations? b) Calculate the par yield on the 1-year bond with semi-annual coupons
Suppose a five-year bond with an 8% coupon rate and semi-annual compounding is trading for a price of £951.58. Calculate the bond's yield to maturity (YTM) based on the expression of an annual percentage rate (APR).
The 3-year interest rate is 6.60%, and the 4-year interest rate is 7.90%. The liquidity premia for 3- and 4-year bonds are 0.60% and 0.9%, respectively. Calculate the adjusted forward-rate forecast for 3 periods in the future. (Round your answer to two decimal points.)
Consider the following scenario: A bond has a price of $95 (Par Value 100). It matures in 7 years and pays coupons semi-annually. Find the coupon rate of the bond (in annual terms) that would yield a duration of 5.5.
The function s(t) = 0.03 + 0.003t gives the effective annual rate of a zero coupon bond of maturity 7, with t in years. Find the price of a 2 year coupon bond with semiannual coupons of 8.5% and a face/redemption value of $800,000.
You observe that one, two, and three-year maturity, default-free, zero-coupon bonds have YTM of 7%, 7.8%, and 7.5%, respectively. Based on the expectations theory, what is the implied one-year forward rate, two years from today? ⒸA. 8.62% OB 6.90% OC.8.12% O 0.7.39%
One bond has a coupon rate of 7.8%, another a coupon rate of 9.4%. Both bonds pay interest annually, ahve 7-year maturities, and sell at a yield to maturity of 7%. a. If their yields to maturity next year are still 7%, what is the rate of return on each bond?
The one-year spot rate z1 = 5% and the forward price for a one-year zero-coupon bond beginning in one year is 0.9346. Find the spot price (zero price) of a two-year zero-coupon bond.
The function s(t) = 0.16 − 0.04 e− t/4 provides the term structure of effective annual rates of zero coupon bonds of maturity t, with t in years. Find the following: (a) The effective annual rate of a 3 year zero coupon bond. (b) The 2-year forward effective annual rate for a one year period. (c) The forward effective annual rate for a one year period, 3 years forward. (d) The 3-year forward effective annual rate for a 3 month period. (e) The forward effective annual rate for a one day period, 3 years forward (the “overnight” rate).(Use 1/365 for a one-day period.)
Bond A has a coupon rate of 10.04 percent, a yield-to-maturity of 14.79 percent, and a face value of $1,000.00; matures in 8 years; and pays coupons annually with the next coupon expected in 1 year. What is (X+Y+Z) if X is the present value of any coupon payments expected to be made in 3 years from today, Y is the present value of any coupon payments expected to be made in 6 years from today, and Z is the present value of any coupon payments expected to be made in 9 years from today? An amount equal to or greater than $82.70 but less than $124.77 O An amount equal to or greater than $141.42 but less than $172.16 O An amount equal to or greater than $124.77 but less than $141.42 O An amount less than $82.70 or a rate greater than $229.36 An amount equal to or greater than $172.16 but less than $229.36

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