**Treasury Notes and Bonds**Use the information in the following table. Assume a $100,000 par value. What is the yield to maturity of the August 2002 Treasury bond with semiannual payment? Compare the yield to maturity and the current yield. How do you explain this relationship?---**What is the yield to maturity of the August 2002 Treasury bond?**[ ] % (Round to three decimal places.) **Bond Information as of February 15, 2008**- **Type:** Bond- **Issue Date:** August 2002- **Price (per $100 par value):** 86.38- **Coupon Rate:** 5.00%- **Maturity Date:** August 15, 2012- **YTM (Yield to Maturity):** Not available- **Current Yield:** 5.788%- **Rating:** AAA**Explanation:**This table provides key details about a bond as of February 15, 2008. The bond was issued in August 2002 and is priced at $86.38 per $100 of par value. It has an annual coupon rate of 5.00%. The bond matures on August 15, 2012. The Yield to Maturity (YTM) is not provided, indicating it might require calculation based on additional data; however, the Current Yield is 5.788%. The bond holds a top credit rating of AAA, reflecting a low risk of default.

Given: Par value = $100,000 Coupon rate = 5% Present value = 86.38%

Answered: Treasury notes and bonds. Use the…

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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Please see attached. Definitions: Coupon is the regular interest payment of a bond. Coupon rate is the interest rate for the bond coupons, expressed in annual percentage terms. Par value is the principal amount to be repaid at the maturity of the bond. Yield to maturity (YTM) is the return the bond holder receives on the bond if held to maturity. Maturity date is the expiration date of the bond on which the final interest payment is made as well as the principal repayment.
Give typing answer with explanation and conclusion The price of a newly issued 3-month T-bill with a face value of $1,000 is $992. A) What is the bond-equivalent yield? B) What is the discount yield?
Consider the following: Price Yield to maturity Periods to maturity Modified duration Fixed-rate Bond Fixed-rate Note 107.18 5.00% 18 6.9848 100.00 5.00% 8 3.5851 a. For an increase in interest rates of 100 basis points, determine the change in value for the fixed-rate note. Show your work. b. For an increase in interest rates of 100 basis points, determine the change in value for the fixed-rate bond. Show your work. c. Which of the two fixed-rate securities are more sensitive to increases interest rates? Why? d. What would be the most appropriate course of action to take given interest rates are expected to rise? Explain carefully.
Calculate the value of each bond and discuss whether it sells at par, discount, or premium. (Annual interest rate) O A. Bond Bond Value A B C O B. Bond A B C O C. Bond A B с O D. Bond A B C $1,149.39 Discount $1,000.00 Par $85.60 Premium Bond Value Sells at par/discount/premium Bond Value $1,149.39 Premium $1,000.00 Par $85.60 Discount Sells at par/discount/premium Bond Value Sells at par/discount/premium $1,149.39 Premium $1,000.00 Par $85.60 Premium Sells at par/discount/premium $1,049.39 Premium $1,100.00 Premium $85.60 Discount Bond Par value Coupon interest Years to rate maturity JA B IC $1000 14% $1000 18% $100 10% 120 16 18 Required return 12% 8% 13%
Years to i Data Table Coupon Rate Maturity 9% 25 (Click on the following icon O in order to copy its contents into a spreadsheet.) Yield to Maturity 5% 9% 6% 10% Years lo Price Cotron Rat 9% Par Value $1,000.00 $1,000.00 $5,000.00 $5.000.00 25 30 5% 10% 11% 25 25 Print Done
Assume all bonds have par or face value of 1,000
am. 122.
From page 9-3 of the VLN, when determining the issue price of a bond, which interest rate would you use? Group of answer choices A. Stated rate B. Market rate C. Nominal rate D. Compound rate
A recent listing for a Treasury bill gave an Asked Bank Discount Yield (d) of 1.30%. Its maturity was 80 days. a. What is the T-bill's coupon (bond) equivalent yield (y)?
Refer to Table 10-2. a. Assume the interest rate in the market (yield to maturity) goes down to 8 percent for the 10 percent bonds. Using column 2, indicate what the bond price will be with a 10-year, a 20-year, and a 25-year time period. b. Assume the interest rate in the market (yield to maturity) goes up to 12 percent for the 10 percent bonds. Using column 3, indicate what the bond price will be with a 10-year, a 20-year, and a 25-year period. c. Assume the interest rate in the market (yield to maturity) goes down to 8 percent for the 10 percent bonds. If interest rates in the market are going down, which bond would you choose to own? multiple choice 1 10 Years 20 Years 25 Years d. Assume the interest rate in the market (yield to maturity) goes up to 12 percent for the 10 percent bonds. If interest rates in the market are going up, which bond would you choose to own? multiple choice 2 10 Years 20 Years 25 Years
Using semiannual compounding, find the prices of the following bonds: a. A 9.8%, 15-year bond priced to yield 7.7%. b. A 7.3%, 10-year bond priced to yield 9.4%. c. A 11.6%, 20-year bond priced at 9.5%. Repeat the problem using annual compounding. Then comment on the differences you found in the prices of the bonds. a1. Using semiannual compounding, the price of the bond is $nothing. (Round to the nearest cent.)
Excel Activity: Bond Valuation Clifford Clark is a recent retiree who is interested in investing some of his savings in corporate bonds. His financial planner has suggested the following bonds: • Bond A has a 10% annual coupon, matures in 12 years, and has a $1,000 face value. • Bond B has an 8% annual coupon, matures in 12 years, and has a $1,000 face value. • Bond C has a 12% annual coupon, matures in 12 years, and has a $1,000 face value. Each bond has a yield to maturity of 10%.

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