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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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%
The term structure for zero-coupon bonds is currently: Maturity (Years) YTM (%) 1 5.2% 2 6.2 3 7.2 Next year at this time, you expect it to be: Maturity (Years) YTM (%) 1 6.2% 2 7.2 3 8.2 Required: What do you expect the rate of return to be over the coming year on a 3-year zero-coupon bond? Under the expectations theory, what yields to maturity does the market expect to observe on 1- and 2-year zeros at the end of the year? Is the market's expectation of the return on the 3-year bond greater or less than yours?
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 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.)
Current 1-year spot rate is 3.5%. Annual volatility of interest rates is 10%. If rr₁, =4.5%, calculate the price of a 2-year bond with annual 5% coupon (paid annually). Assume face value of $100. Type your answer...
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
A one year zero coupon treasury bond yields 4.83% and a two year zero coupon treasury yields 4.88%. What is the expected 1 year interest rate 1 year from now, assuming no-arbitrage pricing and no liquidity premium? Enter answer in percents to 2 decimal places. For example, enter 14.15 for 14.15%.
Find the duration of a 6% coupon bond making annual coupon payments if it has three years until maturity and a yield to maturity of 7.9%. What is the duration if the yield to maturity is 11.9%? (Do not round intermediate calculations. Round your answers to 4 decimal places.) YTM 7.9% YTM 11.9% YTM Duration
a bond has an annual modified duration of 6.25 years and an annual convexity of 45.25. If the bond's yield to maturity decreases by 50 basis points, the expected percentage price change is closest to: a)3.07% b)-3.07% c)-2.65%
A 2-year maturity bond with face value of $1,000 makes annual coupon payments of $88 and is selling at face value. What will be the rate of return on the bond if its yield to maturity at the end of the year is: Note: Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places. a. 6% b. 8.8% c. 10.8% Rate of Return % % %
Compute the price of a risk-free bond with a face value of $1,000 that has seven years left to maturity, a coupon rate of 5%, and annual interest payments. Assume it just made a coupon payment (i.e., it has seven annual payments left). The current term structure of risk-free rates is provided below. Face value Coupon rate $ 1,000.00 5.00% Term structure Maturity 1 2 3 4 5 6 7 Risk-free yields 1.00% 1.50% 2.00% 2.50% 3.00% 3.50% 4.00% Coupon payment Face value Cash flows PV (CF) Price
A 7.7% coupon bearing bond pays interest semi-annually and has a maturity of 3 years. If the annual yield to maturity is 5.9%, what is the current price of this bond?

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