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 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?
Kirstin Brown is a portfolio manager at Standard life plc. She wants to estimate the interest rate riskof assets of the company consisting of 1 million shares of Bond A, 2 million shares of Bond B, and 2million shares of Bond C. The duration of Bond A is 5.59, a valuation model found that if interest ratesdecline by 30 basis points, the value of Bond A will increase to 83.5 pounds, and if interest ratesincrease by 30 basis points, the value of Bond to A will decline to 80.75 pounds. The same valuationmodel also found that if interest rates decreases by 50 basis points, the value of Bond B increases to104.6 pounds, and if interest rates increases by 50 basis points, the value of Bond B decreases to 96.4pounds, and the current value of Bond B is 100 pounds. Kirstin also knows from the valuation modelthat, by using the duration and convexity rule, if interest rates decline by 1%, the price of bond Cincreases approximately by 8.46 pounds, and if interest rates increase by 3%, the price of…
Lance Whittingham IV specializes in buying deep discount bonds. These represent bonds that are trading at well below par value. He has his eye on a bond issued by the Leisure Time Corporation. The $1,000 par value bond pays 4 percent annual interest and has 18 years remaining to maturity. The current yield to maturity on similar bonds is 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. What is the current price of the bonds? (Do not round intermediate calculations. Round your final answer to 2 decimal places. Assume interest payments are annual.) Current price of the bond b. By what percent will the price of the bonds increase between now and maturity? (Do not round intermediate calculations. Input your answer as a percent rounded to 2 decimal places.) Price increases by
you bought a 30-year bonds many years ago. The bond has par value of $ 1,000 and coupon rate of 12%, paid semi-annually. The current price of the bond is $1,137.99 and the yield to maturity is 10%. How many years ago did yoy buy the bond Note:- Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism. Answer completely. You will get up vote for sure
An investment firm recommends that a client invest in bonds rated AAA, A, and B. The average yield on AAA bonds is 4%, on A bonds 5%, and on B bonds 8%. The client wants to invest twice as much in AAA bonds as in B bonds. How much should be invested in each ype of bond if the total investment is $9,000, and the investor wants an annual return of $470 on the three investments? The client should invest $ in AAA bonds, $in A bonds, and $[ in B bonds.
Consider a one-year, 5-percent coupon bond with a face value of $100 issued by a Seabass Corporation. There is a 10 percent probability that it will default on its bonds and the risk-free interest rate (i) is 3.0%. If an investor were willing to pay $917.48 for the bond, is that investor risk-neutral or risk averse
Which of the following are characteristics of Treasury bills (T- bills)? Check all that apply. There is a secondary market for T - bills. Institutional investors can purchase T - bills. Individuals can purchase T- bills. T - bills have maturities of 28, 91, and 182 days. Suppose Mr. Smith buys a 30-day T - bill with a face value of $1,000 at a price of $ 996. The discount rate yield (DRY) would be, whereas the investment return yield (IRY) would be.
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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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