The treasurer of a large corporation wants to invest $23 million in excess short-term cash in a particular money market inves prospectus quotes the instrument at a true yield of 3.42 percent; that is, the EAR for this investment is 3.42 percent. Howeve treasurer wants to know the money market yield on this instrument to make it comparable to the T-bills and CDs she has alre bought. If the term of the instrument is 122 days, what are the bond equivalent and discount yields on this investment? Note: Do not round intermediate calculations. Enter your answers as a percent rounded to 3 decimal places. Bond equivalent yield Discount viold. % 01

The treasurer of a large corporation wants to invest $23 million in excess short-term cash in a particular money market inves prospectus quotes the instrument at a true yield of 3.42 percent; that is, the EAR for this investment is 3.42 percent. Howeve treasurer wants to know the money market yield on this instrument to make it comparable to the T-bills and CDs she has alre bought. If the term of the instrument is 122 days, what are the bond equivalent and discount yields on this investment? Note: Do not round intermediate calculations. Enter your answers as a percent rounded to 3 decimal places. Bond equivalent yield Discount viold. % 01

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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A few years ago, Big Rock invested in a number of bonds with various maturity dates. Several of these bonds will mature in the coming months. However, there is some disagreement about how to calculate the bond yields. Some people are insisting that the nominal yield should be used. Others have said the yield-to-call should be used. And a third group believes that the realized yield should be used. Explain each of the following methods that can be used to calculate the yield of a bond. a. Nominal yieldb. Yield to callc. Realized Yield
A company sold bonds a few years ago which currently have 30 years remaining to maturity. The coupon rate on these bonds is 7 percent. The bonds make semiannual coupon payments. Today you can buy each of these bonds for $1,070. Calculate the yield to maturity. In this problem, the yield to maturity is solved the easiest using the financial calculator. I will need to use [ Select ] [ Select ] for "N" (number of coupons) and [ Select ] [ Select ] for "PMT" (coupon). In this problem, my numerical answer for the yield to maturity is [ Select ] . [ Select ]
A manager of a commercial bank’s security portfolio is analyzing three bonds and is using duration as the measure of interest rate risk. The three bonds all trade at a yield to maturity of 10 percent and have $10,000 par values. The bonds differ only in the amount of annual coupon interest that they pay: 8, 10, or 12 percent. What is the duration for each five-year bond? What is the relationship between duration and the amount of coupon interest that is paid?
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Katie Pairy Fruits Incorporated has a $2,200 23-year bond outstanding with a nominal yield of 15 percent (coupon equals 15 % × $2,200 = $330 per year). Assume that the current market required interest rate on similar bonds is now only 12 percent. Use Appendix B and Appendix D for an approximate answer but calculate your final answer using the formula and financial calculator methods. a. Compute the current price of the bond. Note: Do not round Intermediate calculations. Round your final answer to 2 decimal places. Assume interest payments are annual. Current price of the bond b. Find the present value of 3 percent x $2,200 (or $66) for 23 years at 12 percent. The $66 is assumed to be an annual payment. Add this value to $2,200. Note: Do not round intermediate calculations. Round your final answer to 2 decimal places. Assume interest payments are annual, Present value

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