You have a treasury bond that pays $100 one year from today and $1,100 two years from today. You notice that the yield-to-maturity on a one year- zero coupon treasury bond is 1% and the yield-to- maturity on a two year-zero coupon treasury bond is 2%. What should the price of your bond be? 1, 177.44 1, 246.37 1, 156.30 1, 223.46 O O

You have a treasury bond that pays $100 one year from today and $1,100 two years from today. You notice that the yield-to-maturity on a one year- zero coupon treasury bond is 1% and the yield-to- maturity on a two year-zero coupon treasury bond is 2%. What should the price of your bond be? 1, 177.44 1, 246.37 1, 156.30 1, 223.46 O O

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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Similar questions

There are three bonds that mature at the same time, have the same par value, and are expected to pay their first annual coupon 1 next year. The bonds are detailed in the below table. Bond A B с PV PV PV Present Value B ? ? ? PV B If ca r, then what can we say about the prices of the bonds today? (Enter >, <, or ?) PV C PV Yield to Maturity C r rb Coupon Rate ca с с
Consider the following bonds. Bond A B с D Coupon Rate (annual payments) 0.0% 0.0% 3.5% 7.8% Maturity (years) 10 15 15 10 Which of the bonds A to D is most sensitive to a 1% drop in interest rates from 6.7% to 5.7%? Which bond is least sensitive? Provide an intuitive explanation for your answer.
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
A zero-coupon bond with face value $1,000 and maturity of five years sells for $741.22. a. What is its yield to maturity? (Round your answer to 2 decimal places.) Yield to maturity % b. What will the yield to maturity be if the price falls to $725? (Round your answer to 2 decimal places.) Yield to maturity %
Suppose you want to figure out the relationship between duration and maturity, so you consider the following three T-Bonds. You compute a. The duration of a two-year Treasury bond with a 10 percent semiannual coupon selling at par b. The duration of a three-year Treasury bond with a 10 percent semiannual coupon selling at par c. The duration of a four-year Treasury bond with a 10 percent semiannual coupon selling at par
A Treasury note has 2.5 years left to maturity, a yield to maturity of 3.6 percent, and a coupon rate of 4.40 percent. What is the price of the bond? O $1,015.41 O $1,015.53 O $1,016.56 O $1,018.96
4. A bond with a coupon rate of 7.30% has a price that today equals $868.92. The $1,000 face value bond pays coupon every 6 months, 30 coupons remain, and a coupon was paid yesterday. Suppose you buy this bond at today’s price and hold it so that you receive 20 coupons. You sell the bond upon receiving that last coupon. Find the selling price if the bond’s YTM remains constant.
BASIC (Questions 1-17) 1. Interpreting Bond Yields Is the yield to maturity on a bond the same thing as the required return? Is YTM the same thing as the coupon rate? Suppose today a 10 percent coupon bond sells at par. Two years from now, the required return on the same bond is 8 percent. What is the coupon rate on the bond now? The YTM? LO 2 LO 2 2. Interpreting Bond Yields Suppose vou buy a 7 percent counon 20-vear

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