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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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
A bond presently has a price of $1,030. The present yield on the bond is 8.00%. If the yield changes from 8.00% to 8.10%, the price of the bond will go down to $1,020. The duration of this bond is __________. -10.5 -8.5 9.7 10.5 11
Suppose that a one-year, risk-free, zero-coupon bond with a $100,000 face value has an market price of $96,618.36. If you purchased this bond and held it to maturity, what is the yield-to-maturity on your bond? (Hint: use 4 decimal places for your calculations.) A. 1.50% B. 2.49% C. 4.49% D. 5.20% E. None of the above. 2.
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
2
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 %
You are holding a government bond which has 17 years left to mature. The bond makes semi-annual payments with 8% coupon rate and yield to maturity is 13%. What is the value of the bond now? Select one: a.721.15 b.625.10 c.660.58 O d.713.51
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
You are given the following information: The price of a one-year zero coupon bond with par value of $100 is $96.35. • The second year 1-year forward rate is 7%. The second year 2-year forward is 9%. Calculate the price of a 3-year bond with par value of $100 and 5% annual coupons. (A) $93.0 (B) $94.5 (C) $96.5 (D) $97.5 (E) $99.0
Consider a coupon bond, period t = 0 price $900, with payments: t=0 1 2 3 50 50 1050 Discount (zero coupon) bonds of 1, 2 and 3 years maturity (all with maturity value of $1000) sell for respectively, 960, 900, 820 dollars. Is this coupon bond properly priced? If not, design an arbitrage argument to profit by the mispricing.

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