The term structure for zero-coupon bonds is currently. Maturity (Years) YTM (%) 4.5% 5.5 6.5 Next year at this time, you expect it to be: Maturity (Years) YTM (%) 5.5% 6.5 7.5 a. What do you expect the rate of return to be over the coming year on a 3-year zero-coupon bond? (Round your answer to 1 de place.) decimal Rate of return 96 b-1. 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? (Round your answers to 2 decimal places.)

The term structure for zero-coupon bonds is currently. Maturity (Years) YTM (%) 4.5% 5.5 6.5 Next year at this time, you expect it to be: Maturity (Years) YTM (%) 5.5% 6.5 7.5 a. What do you expect the rate of return to be over the coming year on a 3-year zero-coupon bond? (Round your answer to 1 de place.) decimal Rate of return 96 b-1. 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? (Round your answers to 2 decimal places.)

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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The term structure for zero-coupon bonds is currently: Maturity (Years) YTM (%) 1 4.7% 123 5.7 6.7 Next year at this time, you expect it to be: Maturity (Years) YTM (%) 1 5.7% 23 2 6.7 7.7 3 Required: a. What do you expect the rate of return to be over the coming year on a 3-year zero-coupon bond? b. 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? c. Is the market's expectation of the return on the 3-year bond greater or less than yours? Complete this question by entering your answers in the tabs below. Required A Required B Required C What do you expect the rate of return to be over the coming year on a 3-year zero-coupon bond? Note: Round your answer to 1 decimal place. Rate of return % < Required A Required B
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?
The term structure for zero-coupon bonds is currently: Maturity (Years) YTM (%) 1 4.6% 5.6 6.6 2 3 Next year at this time, you expect it to be: Maturity (Years) 2 YTM (%) 5.6% 6.6 7.6 Required: a. What do you expect the rate of return to be over the coming year on a 3-year zero-coupon bond? b. 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? c. Is the market's expectation of the return on the 3-year bond greater or less than yours? Complete this question by entering your answers in the tabs below. Required A Required B Required C 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? Note: Round your answers to 2 decimal places. Maturity 1 2 YTM % %
You observe the following term structure: Effective Annual YTM 1-year zero-coupon bond 2-year zero-coupon bond 3-year zero-coupon bond 4-year zero-coupon bond 8.1% 8.2 8.3 8.4 a. If you believe that the term structure next year will be the same as today's, calculate the return on (i) the 1-year zero and (1i) the 4-year zero. (Do not round intermediate calculations. Round your answers to 1 decimal place.) One year return on 1-year bond One year return on 4-year bonds % % b. Which bond provides a greater expected 1-year return? O 1-year zero-coupon bond O 4-year zero-coupon bond
You have built the following interest rate tree for the next 2 years: Time 0 (%) Time 1 (%) i2h = 3.52 i1 = 2.65 21 = 1.31 What would be the implied price of a 4.3% 2-year bond based on this information?
You observe the following term structure: Effective Annual YTM 1-year zero-coupon bond 8.1% 2-year zero-coupon bond 8.2 3-year zero-coupon bond 8.3 4-year zero-coupon bond 8.4 Required: If you believe that the term structure next year will be the same as today’s, calculate the return on (i) the 1-year zero and (ii) the 4-year zero. Which bond provides a greater expected 1-year return?
Suppose you can observe that 1-year bond interest rate is 4%, 2-year bond interest rate is 8%, and 3-year bond interest rate is 10% at time t. It is also known that the term premium on a 2-year bond is 1% and the term premium on a 3-year bond is 1.5%. a) What are the market's expected 1-year bond interest rates for the next two years from time t? b) How to interpret those expected short-term interest rates? (what would be the "possible" economic meanings in the expected short- term interest rates?) Discuss as least two "candidates" to explain them.
Bha
Consider the following par bond (ie coupon rate=yield):Year: 10 and 20 years . Yld 1.50% and 2.0% Q1b. how much should the 20y bond be priced 1 year later (as a 19 year bond)?
Suppose that the continuously compounded zero rates are listed in the table below: Maturity (Months) Zero Rate (%) 6 2 12 2.8 18 3.3 24 3.6 30 4.4 Estimate the price of a bond with a face value of $100 that will mature in 30 months and pays a coupon of 6% per annum semiannually. (Required precision: 0.01 +/- 0.01)
Consider an 8 - year coupon bond which is selling at par (annual couponpayments) . YTM is currently 6% . What is the price of this bond one yearfrom today if the YTM at that point is 8% (Face value is 100) ?a) 100b) 88.51c) 111.16d) 89.59e) 112.4The answer is D. I just need to see the steps on how to get there.
Consider a 10-year bond with current price of $98.4 and a duration of 9.1 years. Suppose the yield on the bond is 9.6% per year with continuous compounding. What is the predicted change in the price (in dollars) of the bond if the yield increases by 0.4%? (required precision: 0.01 +/- 0.01)

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