You are given the following data for two bonds with semiannual payments (A and B)BondYears to MaturityCoupon rate20208%4%Similar bonds with 20 year to maturity sell for 9% coupon rates in the market.Calculate the bond value for bond A and BWhat happends if the coupon rate of similar bonds drops to 6%?Calculate the bond value for bond A and BBond ValuationRequired ReturnCoupon4.50%4.50%8040Par-value10001000Frequency2BasisYieldBond 1Bond 24.5%Price ChangePercentage ChangeList the main bond theorems you derive from the above calculation

Here, Bond value is 'P' The coupon payment is 'C' The coupon rate is 'r' The period of compounding…

Answered: You are given the following data for…

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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Can you answer the question in the picture, please?
Bond A is a premium bond with a 9 percent coupon. Bond B is a 5 percent coupon bond currently selling at a discount. Both bonds make annual payments, have a YTM of 6 percent, and have five years to maturity. The face value is $1000 for both bonds. a. Why is the capital gain yield of the premium bond different from that of the discount bond? Which bond is better in terms of yields? b. What is the holding period return for each bond, if both bonds are held over the next year and sold at the year ned?
You have purchased a bond for $973.02. The bond has a coupon rate of 6.4%, pays interest annually, has a face value of $1,000, 4 years to maturity, and a yield to maturity of 7.2%. You expect that interest rates will fall by .3% later today. a) Calculate the bond’s macauly duration b) Use the modified duration to find the approximate percentage change in the bond's price. Find the new price of the bond from this calculation. c) Suggest how the estimate in part (b) can be improved.
Required: a. Find the duration of a 6.4% coupon bond making annual coupon payments if it has three years until maturity and has a yield to maturity of 6.4%. Note: The face value of the bond is $1,000. Do not round intermediate calculations. Round your answer to 2 decimal places. b. What is the duration if the yield to maturity is 10%? Note: The face value of the bond is $1,000. Do not round intermediate calculations. Round your answer to 2 decimal places. a. 6.4% YTM b. 10% YTM years years
The term structure for zero-coupon bonds is currently: Maturity (Years) YTM (%) 1 5.2% 2 6.2 3 7.2 Next year at this time, you expect it to be: Maturity (Years) YTM (%) 1 6.2% 2 7.2 3 8.2 Required: What do you expect the rate of return to be over the coming year on a 3-year zero-coupon bond? Under the expectations theory, what yields to maturity does the market expect to observe on 1- and 2-year zeros at the end of the year? Is the market's expectation of the return on the 3-year bond greater or less than yours?
A General Power bond carries a coupon rate of 9.7%, has 9 years until maturity, and sells at a yield to maturity of 8.7%. (Assume annual interest payments.) a. What interest payments do bondholders receive each year? b. At what price does the bond sell? Note: Do not round intermediate calculations. Round your answer to 2 decimal places. c. What will happen to the bond price if the yield to maturity falls to 7.7%? Note: Do not round intermediate calculations. Round your answer to 2 decimal places. a. Interest payments b. Price c. Price will by rise fall
Suppose you are given the following information about four different, default-free bonds, each with a face value of $1,000. The coupon bonds have annual payments. The yield to maturity of bond A with a maturity of 1 year and a coupon rate of 0% is 2%. The yield to maturity of bond B with a maturity of 2 year and a coupon rate of 10% is 3.908%. The yield to maturity of bond C with a maturity of 3 year and a coupon rate of 6% is 5.840%. The yield to maturity of bond D with a maturity of 4 year and a coupon rate of 12% is 5.783%. Given this information, what is the four-year spot rate?
A plot of the yields on bonds with different terms to maturity but the same risk, liquidity, and tax considerations is known as O A. a yield curve. B. a risk-structure curve. OC. a term-structure curve. 5- O D. an interest-rate curve. Suppose people expect the interest rate on one-year bonds for each of the next four years to be 3%, 6%, 5%, and 6%. If the expectations theory of the term structure of interest rates is correct, then the implied interest rate on bonds with a maturity of four years is nearest whole number). %. (Round your response to the 2- Refer to the figure on your right. Suppose the expected interest rates on one-year bonds for each of the next four years are 4%, 5%, 6%, and 7%, respectively. 1. 1.) Use the line drawing tool (once) to plot the yield curve generated. 3 Term to Maturity in Years 2.) Use the point drawing tool to locate the interest rates on the next four years. 5. 3- Interest Rate .....
不 Which of the bonds A to D is most sensitive to a 1%drop in interest rates from Consider the following bonds: 6.5% to 5.5% Which bond is least sensitive? Bond Data table is most sensitive. (Select from the drop-down menu.) (Click on the following icon in order to copy its contents into a spreadsheet.) Bond A BC D Coupon Rate (annual payments) 0.0% 0.0% 4.3% 7.7% Print Done Maturity (years) 10 15 15 10
A newly issued bond with 1 year to maturity has a price of $1,000, which equals its face value. The coupon rate is 15% and the probability of default in 1 year is 35%. The bond’s payoff in default will be 65% of its face value. a. Calculate the bond’s expected return. b. Use a data table to show the expected return as a function of the recovery percentage and the price of the bond. Please show how you got part B using all functions.
Consider a bond that is currently priced at $1100. If the face value of the bond is $1000, coupon payments are made semiannually, the bond matures in 5 years, and the YTM is 3%, what is the coupon rate? Group of answer choices 5.17% 2.58% 3.00% $25.84
Do not use excel, use formulas to compute the question You have two bonds, Bond A and bond B: A 3-year zero-coupon bond with face value of $1,000 with a yield-to-maturity of 4%. A 6-year bond with an annual coupon payment C (to be paid out starting a year from now), a face value of $1,000 and yield-to-maturity of 5%. Assume that compounding takes place annually. If the price of Bond A is equal to the price of Bond B, what is the value of Bond B’s coupon payments (C)?

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