Which of the following bonds will have the larger price change (dollar value) for a 75- basis point change in yield? A. A $120 dollar bond with duration 2.25 B. A $70 dollar bond with duration 3.25 C. A $160 dollar bond with duration 1.75 D. A $200 dollar bond with duration 1.25 E. A $300 dollar bond with duration 0.75

Which of the following bonds will have the larger price change (dollar value) for a 75- basis point change in yield? A. A $120 dollar bond with duration 2.25 B. A $70 dollar bond with duration 3.25 C. A $160 dollar bond with duration 1.75 D. A $200 dollar bond with duration 1.25 E. A $300 dollar bond with duration 0.75

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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Given the information below, which bond(s) will be issued at a discount? Stated Rate of Return Market Rate of Return. Bond 1. O Bond 2. Bond 4. O Bonds 1 and 2. Bond 1 5% 7% Bond 2 7% 8% Bond 3 12% 12% Bond 4 10% 9%
Which of the following statements is CORRECT? a. If a coupon bond is selling at par, its yield to maturity is equal to zero. b. If a coupon bond is selling at a discount, its price will continue to increase until it reaches its par value at maturity. c. If interest rates increase, the price of a 10-year coupon bond will decline by a greater percentage than the price of a 10-year zero coupon bond. d. If a bond's yield to maturity exceeds its annual coupon, then the bond will trade at a discount. e. If a coupon bond, is selling at a premium, its yield to maturity is equal to zero. ANSWER IS NOT C
***YTC, YTM, and holding period yield they all refer to the r in the formula: P=C*[1-1/(1+r)^t]/r + F/(1+r)^t. They are just different expressions under different circumstances. 9. What is the yield to call (YTC) of a 30-year 6% bond selling for $940? The call deferment period for the bond is 10 years. Call premium=30. [Hint: It means that your N=10*2=20, and your face value=1030] 10. What is the yield to call (YTC) of a 20-year 8% bond selling for $1030? The call deferment period for the bond is 5 years. Call premium=40. [Hint: It means that your N=5*2=10, and your face value=1040] 11. Still considering the same bond as question 10, suppose you buy it today, but expect to sell it in 2 years at a YTM=4%. That is, you expect the yield to maturity on this bond to be 4% when you sell it in 2 years. What price do you expect to sell it for? What is your expected holding period yield if you buy it today and sell it at the expected sell price? 12. What is the holding period yield on a 30-year…
Explain why are the bond prices for A and B different or the same? Explain your answer clearly.
15. Bonds with a face value of $100,000 that are issued for $99,400 have a stated interest rate a. that is more than the yield rateb. that is less than the yield ratec. that is equal to the yield rated. that may be more or less than the yield rate, but there is notenough information given to determine which
Please do not give image format
Assume the following: Bond A coupon = 6%, maturity = 5 years, yield to maturity = 6% Bond B coupon = 0%, maturity = 5 years, yield to maturity = 6% Bond C coupon = 6%, maturity = 5 years, yield to maturity = 6.5% Which of the following statements concerning duration is correct? Group of answer choices A. Duration of C<Duration of A=Duration of B. B. Duration of A>Duration of B>Duration of C. C. Duration of C < Duration of A < Duration of B. D. Duration of A< Duration of B<Duration of C.
13. Calculate the percentage change in a bond's price if its current yield is 8 percent, rates are expected to decrease by 0.25% and the bond's duration is 7.5. 1.875%- b. -1.875% c. 1.736% d. -1.736% 15002520.01975 x\
8. Which bond is more sensitive to an interest rate change of 0.75 percent? Bond A: YTM - 4.00%, maturity - 8 years, coupon = 6% or $60, par value = $1,000. Bond B: YTM = 3.50%, maturity 5 years, coupon = 7% or $70, par value = $1,000. (a) Bond A (b) Bond B (c) Both are equally sensitive. (d) Cannot be determined
1. If a company's bonds are selling at a discount, then Select one: a. The coupon interest rate is equal to the going interest rate b. The going rate of interest is above the coupon rate c. The current interest rates are below the coupon rate d. The YTM is below the coupon interest rate
Which type of bonds will have more volatile prices and returns? A. 30-year Treasuries B. 10-year Treasuries
Consider the following two Treasury securities: Bond Price Modified duration (years) A $100 6 B $80 7 For a 25 basis-point change in interest rates, which bond has the greatest percentage change in price? A. Bond A B. Bond B C. Can't be determined

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