You find a zero coupon bond with a par value of $10,000 and 24 years to maturity. The yield to maturity on this bond is 4.6 percent. Assume semiannual compounding periods. What is the price of the bond? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Price
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- One bond has a coupon rate of 7.4%, another a coupon rate of 9.2%. Both bonds pay interest annually, have 11-year maturities, and sell at a yield to maturity of 8.0%. a. If their yields to maturity next year are still 8.0%, what is the rate of return on each bond? (Do not round intermediate calculations. Enter your answers as a percent rounded to 1 decimal place.) b. Does the higher-coupon bond give a higher rate of return over this period?A. You have a one-year zero coupon bond that pays 1,000 which price today is 909.09. You have a two-year coupon bond with a principal value of 2,000 and coupon rate of 10%. Its price is 1,845.334. Determine what is the term structure of interest rates for years 1 and 2. Draw the curve. B. Compute the duration for the coupon bond and for the zero coupon bond and explain how to compute the yield to maturity (only set the equation in the last case) for the coupon bond. C. Assume the YTM for the coupon bond is 14.74%. What is the modified duration for the two bonds? D. What would the new price of the two bonds be if the yield increases by 5%?Consider the following $1,000 par value zero-coupon bonds: Bond Years to Maturity Bond B According to the expectations hypothesis, what is the market's expectation of the yield curve one year from now? Specifically, what are the expected values of next year's yields on bonds with maturities of (a) one year? (b) two years? (c) three years? (Do not round intermediate calculations. Round your answers to 2 decimal places.) с D YTM(%) 5.1% Years to Maturity 1 2 3 6.1 6.6 7.1 YTM (%) % % %
- A 6.45 percent coupon bond with 24 years left to maturity is priced to offer a 5.7 percent yield to maturity. You believe that in one year, the yield to maturity will be 6.2 percent. What would be the total return of the bond in dollars? (Assume interest payments are semiannual.) (Negative amount should be indicated by a minus sign. Do not round intermediate calculations. Round your final answer to 2 decimal places.) Answer is complete but not entirely correct. Total return $ 2.64 × What would be the total return of the bond in percent? (Assume interest payments are semiannual.) (Negative answer should be indicated by a minus sign. Do not round intermediate calculations. Round your final answer to 2 decimal places.) Answer is complete but not entirely correct. Total return 0.14%Consider a bond with a coupon of 7 percent, five years to maturity, and a current price of $1,025.30. Suppose the yield on the bond suddenly increases by 2 percent. a. Use duration to estimate the new price of the bond. (Do not round intermediate calculations. Round your answer to 2 decimal places.) Price b. Calculate the new bond price using the usual bond pricing formula. (Do not round intermediate calculations. Round your answer to 2 decimal places.) PriceYou find a zero coupon bond with a par value of $10,000 and 25 years to maturity. The yield to maturity on this bond is 4.7 percent. Assume semiannual compounding periods. What is the price of the bond?
- Bond j has a coupon of 6.2 percent. Bond k has a coupon of 10.2 percent. Both bonds have 20 years to maturity and have a YTM of 6.9 percent. a. If interest rates suddenly rise by 1 percent, what is the percentage price change of these bonds? Note: A negative value should be indicated by a minus sign. Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places. \table[[,%delta in Price],[Bond j,,%Suppose you are given the following information about the default-free, coupon-paying yield curve: Maturity (years) Coupon rate (annual payment) YTM a. Use arbitrage to determine the yield to maturity of a two-year zero-coupon bond. b. What is the zero-coupon yield curve for years 1 through 4? Note: Assume annual compounding. a. Use arbitrage to determine the yield to maturity of a two-year zero-coupon bond. The yield to maturity of a two-year, zero-coupon bond is %. (Round to two decimal places.) b. What is the zero-coupon yield curve for years 1 through 4? The yield to maturity for the three-year and four-year zero-coupon bond is found in the same manner as the two-year zero-coupon bond. The yield to maturity on the three-year, zero-coupon bond is %. (Round to two decimal places.) %. (Round to two decimal places.) The yield to maturity on the four-year, zero-coupon bond is Which graph best depicts the yield curve of the zero-coupon bonds? (Select the best choice below.) O A. 8- 7- 6-…Suppose that you buy a 1-year maturity bond with a coupon of 7% paid annually. If you buy the bond at its face value, what real rate of return will you earn if the inflation rate is 4%? 6%? 8%? (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places. Negative amount should be indicated by a minus sign.)
- Assume that the real risk-free rate is 1.9% and that the maturity risk premium is zero. If a 1-year Treasury bond yield is 5.6% and a 2-year Treasury bond yields 6.3%. Calculate the yield using a geometric average. What is the 1-year interest rate that is expected for Year 2? Do not round intermediate calculations. Round your answer to two decimal places. % What inflation rate is expected during Year 2? Do not round intermediate calculations. Round your answer to two decimal places. % Comment on why the average interest rate during the 2-year period differs from the 1-year interest rate expected for Year 2. The difference is due to the fact that the maturity risk premium is zero. The difference is due to the fact that we are dealing with very short-term bonds. For longer term bonds, you would not expect an interest rate differential. The difference is due to the fact that there is no liquidity risk premium. The difference is due to the inflation rate reflected in the two interest…Suppose that your firm issued a bond with 10 years until maturity, a face value of $1000, and a coupon rate of 7% (annual payments). The yield to maturity on this bond when it was issued was 6%. For questions e-g, assume that this bond DOES NOT pay any coupon a) What was its price when it was issued? b) For this zero-coupon bond, suppose it is actually sold for $500, what should the YTM be?