Three US government bonds, A, B and C, each with face value $1000, are currently selling in the market for prices of $938.97, $955.55 and $1001.68 respectively. Bond A is a zero-coupon bond with one year to maturity, bond B has a coupon rate of 5% and two years to maturity and bond C has a coupon rate of 8% and three years to maturity? All coupons are paid annually. i. Infer the US spot rate curve from these data. ii. Give two possible explanations that might be used to explain why the curve takes the shape that it does.

Three US government bonds, A, B and C, each with face value $1000, are currently selling in the market for prices of $938.97, $955.55 and $1001.68 respectively. Bond A is a zero-coupon bond with one year to maturity, bond B has a coupon rate of 5% and two years to maturity and bond C has a coupon rate of 8% and three years to maturity? All coupons are paid annually. i. Infer the US spot rate curve from these data. ii. Give two possible explanations that might be used to explain why the curve takes the shape that it does.

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 firm issues 2-year bonds with a coupon rate of 4.9%, paid semiannually. The credit spread for this firm's 2-year debt is 1.2%. New 2-year Treasury notes are being issued at par with a coupon rate of 5.2%. What should the price of the firm's outstanding 2-year bonds be if their face value is $1000? A. $4.80 B. $972.25 C. $777.80 D.
(Related to Checkpoint 9.2) (Yield to maturity) The market price is $800 for a 10-year bond ($1,000 par value) that pays 11 percent annual interest, but makes interest payments on a semiannual basis (5.5 percent semiannually). What is the bond's yield to maturity? The bond's yield to maturity is nothing%. (Round to two decimal places.)
Nikul
A government bond with a coupon rate of 5% makes semiannual coupon payments on January 12 and July 12 of each year. The Wall Street Journal reports the asked price for the bond on January 27 at $1,004.375. What is the invoice price of the bond? The coupon period has 182 days. (Round your answer to 2 decimal places.)
Three years age sells for $1,102, answer the following? issued 10-year internatinal bonds that pay US investors 11% semiannually. Assume that the bond has a $1,000-par-value. If the bond currently a. The yield to maturity on this bond is %. (Round to 2 decimal places.) b. If you are expecting the Federal Reserve (US central bank) to lower interest rates in the near future and you want to gain profit by speculating on a bond, will you buy or sell this bond? Explain. (Select the best answer below.) O A. You should not buy the bond. The relationship between bond price and bond yield is direct. If the interest rate drops in the near future, the bond price will decrease. O B. You should buy the bond. The relationship between bond price and bond yield is inverse. If the interest rate drops in the near future, the bond price will increase.
Even though most corporate bonds in the United States make coupon payments semiannually, bonds issued elsewhere often have annual coupon payments. Suppose a German company issues a bond with a par value of €1,000, 15 years to maturity, and a coupon rate of 7 percent paid annuallly. If the yield to maturity is 10 percent, what is the current price of the bond?
Nikita Enterprises has bonds on the market making semi-annual payments, with 22 years to maturity, a par value of $1,000, and selling for $1,097.08. At this price, the bonds yield 8.72 percent. What must the coupon rate be on the bonds? Answer to four decimal places. e.g. 0.1234 If Treasury bills are currently paying 6.07% and the inflation rate is 2.55%, what is the approximate real rate of interest? Answer to four decimal places. e.g. 0.1234. Westco Company issued 21-year bonds 3 years ago at a coupon rate of 9.24 percent. The bonds make semiannual payments and have a par value of $1,000. If the YTM on these bonds is 6.45%, what is the current price of the bond in dollars? Do not include a $ in your answer.
Even though most corporate bonds in the United States make coupon payments semiannually, bonds issued elsewhere often have annual coupon payments. Suppose a German company issues a bond with a par value of €1,000, 15 years to maturity, and a coupon rate of 7.3 percent paid annually. If the yield to maturity is 8.4 percent, what is the current price of the bond? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Bond price
Suppose a U.S. government bond pays $2,155.40 in 5 years at 6% interest. Calculate the present value of the bond.
A government bond with a face value of $1,000 was issued eight years ago and there are twelve years remaining until maturity. The bond pays annual coupon payments of $90, the coupon rate is 9% pa and rates in the marketplace are 8% p.a. What is the value of the bond today? a. $1,000.00 b. $1,075.36 c. $1,762.35 d. $1,057.47 e. $1,105.29
The University of California has two bonds outstanding. Both issues have the same credit rating, a face value of $1,000 and a coupon rate of 5%. Coupons are paid twice a year. Bond A matures in 1 year, while bond B matures in 30 years. The market interest rate for similar bonds is 9%. Part 1 What is the price of bond A? 0+ decimals Submit Part 2 What is the price of bond B? 0+ decimals
Imagine a 4 year bond issued by the Treasury with a nominal value of 1000€ and 2,5% coupon paid annually. Calculate the price of the bond (€), on the same day of issuance, knowing that the relevant interest rate for the discount is 1,9% Round to the closest second decimal.

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