Two annual coupons bonds both mature in 9 years. Bond A has a coupon rate of 4.00% and a yield to maturity of 8.00%. Bond B has a coupon rate of 8.00% and a yield to maturity of 4.00%.Select one of the following statements that is true about Bond A and Bond B.Bond B is $1297.41 greater than Bond AThe price difference between Bond A and Bond B is $2047.54The price difference between Bond A and Bond B is $547.29Bond A is $750.12 greater than Bond BAll of the Above

Solution:-Bond price means the price at which a bond should trade in the market. It is the summation…

Two annual coupons bonds both mature in 9 years. Bond A has a coupon rate of 4.00% and a yield to maturity of 8.00%. Bond B has a coupon rate of 8.00% and a yield to maturity of 4.00%. Select one of the following statements that is true about Bond A and Bond B. O Bond B is $1297.41 greater than Bond A O The price difference between Bond and Bond B is $2047.54 O The price difference between Bond A and Bond B is $547.29 O Bond A is $750.12 greater than Bond B O All of the Above

Two annual coupons bonds both mature in 9 years. Bond A has a coupon rate of 4.00% and a yield to maturity of 8.00%. Bond B has a coupon rate of 8.00% and a yield to maturity of 4.00%. Select one of the following statements that is true about Bond A and Bond B. O Bond B is $1297.41 greater than Bond A O The price difference between Bond and Bond B is $2047.54 O The price difference between Bond A and Bond B is $547.29 O Bond A is $750.12 greater than Bond B O All of the Above

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 table below shows the time to maturity for 3 bonds, a 2-year, 3-year, and 5- year. Each annual coupon bond has a yield to maturity of 4.36% and a coupon rate of 3.79%. Estimate the percent change in bonds price to a percent change in one plus the interest rate, assuming a 10 basis point change in the interest rates. Approximate Elasticity Maturity 2-year Bond 3-year Bond 5-year Bond
A Treasury bond that matures in 10 years has a yield of 4.50%. A 10-year corporate bond has a yield of 9.25%. Assume that the liquidity premium on the corporate bond is 0.25%. What is the default risk premium on the corporate bond? Round your answer to two decimal places. %
Bond X is a premium bond making semiannual payments. The bond has a coupon rate of 11 percent, a YTM of 9 percent, and 15 years to maturity. Bond Y is a discount bond making semiannual payments, This bond has a coupon rate of 9 percent, a YTM of 11 percent, and also has 15 years to maturity. Both bonds have a par value of $1,000 a. What is the price of each bond today? b. If interest rates remain unchanged, what do you expect the price of these bonds to be 1 year from now? In 6 years? In 10 years? In 14 years? In 15 years? Note: For all requirements, do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16. Bond X Bond Y a. Price today b. Price in 1 year Price In 6 years Price in 10 years Price in 14 years Price in 15 years
Consider four different bonds all having the same yield-to-maturity. Bond A is a consol that pays $50 every period forever and is currently priced at $714.29. Bond B, C and D have the same par value of $1,000. However, they differ in their maturity and coupon rate. Bond B and C have a maturity of 5 years, while bond D has a maturity of 10years. Also, bond B and D have a coupon rate of 6%, while bond C has a coupon rate of 8%. [Hint: Coupons are paid annually to faciliate the calculations. Hence, coupon rates are also given annually. You may want to resort to the annuity formula to make your life easier.] a). Suppose the yield-to-maturity increases by 1%. Calculate the price changes on the individual bonds based on the two duration measures and based directly on the pricing formula. Compare your answers.b). Suppose the yield-to-maturity decreases by 1%. Calculate the price changes on the individual bonds based on the two duration measures and based directly on the pricing formula.…
A bond has a coupon rate of 9% term fo maturity of 5 years and par value of RM 1000. The coupon is paid once a year and the market interest rate is 8%. a. Compute the Macaulay duration for this bond b. Compute the modified duration for this bond c. Explain the advantages of bonds to the issuing firms and also investors
A Treasury bond that matures in 10 years has a yield of 4.75%. A 10-year corporate bond has a yield of 9.25%. Assume that the liquidity premium on the corporate bond is 0.60%. What is the default risk premium on the corporate bond? Round your answer to two decimal places. %
The following table summarizes current prices of various zero-coupon bonds (expressed as a percentage of face value): Bond A B C D Maturity (years) 1 2 3 4 Price (per $100 face value) 96.62 82.56 82.69 83.26 E.G for bond A it will mature in 1 year and has a current bond price of $96.62. For bond B, it will mature in 2 years and had a current bond price of $82.56 Assume the YTM for each bond doesn't change over time. After two years, what is the price for bond D? 1. bond A 2. bond B 3. bond C 4. Bond D
A $1,000 par value bond with a 7.50% coupon rate (semianual interest) matures in 7 years and currently sells for $992.66. What is the bond's yield to maturity and bond equivalent yield? The bond's yield to maturity is%. (Round to two decimal places.)
D Bond P is a premium bond with a 9 percent coupon. Bond D is a 4 percent coupon bond currently selling at a discount. Both bonds make annual payments, have a YTM of 6 percent, and have four years to maturity. What is the current yield for Bond P and Bond D? (Do not round intermediate calculations and round your final answers to 2 decimal places. (e.g., 32.16)) Bond P Bond Current yield 8.15% 4.30 % If interest rates remain unchanged, what is the expected capital gains yield over the next year for Bond P and Bond D? (Negative amount should be indicated by a minus sign. Do not round intermediate calculations and round your final answers to 2 decimal places. (e.g., 32.16))) Bond P Bond D Capital gains yield -2.15 % 1.70 %
A $1,000 par value bond with a 8.25% coupon rate (semianual interest) matures in 7 years and currently sells for $982.02. What is the bond's yield to maturity and bond equivalent yield? The bond's yield to maturity is%. (Round to two decimal places.)
Bond A is a 15-year, 10.50% semiannual-pay bond priced with a yield to maturity of 8.00%, while Bond B is a 15-year, 7.35% semiannual-pay bond priced with the same yield to maturity. Given that both bonds have par values of $1,000, the prices of these two bonds would be: Bond A Bond B A. $1,216.15 $944.67 B. $1,216.15 $913.54 C. $746.61 $913.54
A. Table below is information about three USD10000 par value bonds, each of which pays coupon semiannually. The required rate of return on each bond is 14%. Calculate the value of the bonds and determine whether the bond is selling at discount, premium or par value. Bond Coupon Rate (%) Maturity (years) 1 8 5 2 14 10 3 16 15 B. Using the Interpolation Method to calculate the YTM for the below Bonds: > The par value USD18000 > Coupon Rate 10% every year > Maturity period 10 years > Market Value of bond USD21800

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