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

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter4: Bond Valuation

Section: Chapter Questions

Problem 5MC: What would be the value of the bond described in Part d if, just after it had been issued, the...

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You have a treasury bond that pays \$100$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?
Consider a bond with a face value of $1,000 that sells for an initial price of $700. It will pay no coupons for the first nine years and will then pay 11% coupons for the remaining 29 years. Choose an equation showing the relationship between the price of the bond, the coupon (in dollars), and the yield to maturity. O A. B. O C. O D. 700 = 700 = 700 = 700 = 110 110 9 (1+i)⁹ (1+i)⁹+1 + 110 + i) ⁹ + 1 (1 + 1,000 (1+i) 29-9 1,000 (1 + i) 9 +29 + +...+ 110 (1+i) 9+2 + 110 (1 + i)9+29-1 110 + (1 + i) ⁹ + 110 (1+i)9 +29 9+29-1 + 110 (1 + i)9 +29 + 1,000 (1+i) 9+29
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 a $1,000-par-value Bond with the following characteristics: a current market price of $761, 12 years until maturity, and an 8% coupon rate. We want to determine the discount rate that sets the present value of the bond’s expected future cash-flow stream to the bond’s current market price. You are required to determine the discount rate that equates the present value of the bond?
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.
A bond has a Macaulay duration of 12.00 and is priced to yield 10.0%. If interest rates go up so that the yield goes to 10.5%, what will be the percentage change in the price of the bond? Now, if the yield on this bond goes down to 9.5%, what will be the bond's percentage change in price? Comment on your findings.
What is the yield to maturity on a 10-year, 9%annual coupon, $1,000 par value bond that sellsfor $887.00? That sells for $1,134.20? What does the fact that a bond sells at a discount orat a premium tell you about the relationshipbetween rdand the bond’s coupon rate?
Suppose a 10-year Treasury (risk-free) bond has a YTM of 5% and a Coupon Rate of 5%. Further, a 10-year corporate bond has a YTM of 7% and a coupon rate of 6%. What is the expected risk premium (in dollars) of this bond? a)$44.26 b)$106.18 c)$8.08 d)$71.06
hi there, a-)What is the duration of a two-year bond that pays an annual coupon of 11.4 percent and has a current yield to maturity of 13.4 percent? Use $1,000 as the face value. b) What is the duration of a two-year zero-coupon bond that is yielding 11.5 percent? Use $1,000 as the face value.
Bond X is a premium bond making semiannual payments. The bond pays a coupon rate of 7 percent, has a YTM of 5 percent, and has 19 years to maturity. Bond Y is a discount bond making semiannual payments. This bond pays a coupon rate of 5 percent, has a YTM of 7 percent, and also has 19 years to maturity. The bonds have a $1,000 par value. What is the price of each bond today? If interest rates remain unchanged, what do you expect the price of these bonds to be one year from now? In 11 years? In 14 years? In 16 years? In 19 years? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.)
Suppose a ten-year, $1,000 bond with an 8.4% coupon rate and semiannual coupons is trading for $1,034.84. a. What is the bond's yield to maturity (expressed as an APR with semiannual compounding)? b. If the bond's yield to maturity changes to 9.9% APR, what will be the bond's price? **** a. What is the bond's yield to maturity (expressed as an APR with semiannual compounding)? The bond's yield to maturity is%. (Round to two decimal places.)
You invested in a corporate bond that has a market price today of R1043.22 and a yield to maturity of 7%. This bond has a modified duration of 4.7. You believe that interest rates are going to rise by 195 basis points. What price do you expect your bond to trade at if this anticipated change in the yield occurs? Use the duration rule to calculate your answer, in Rands (R), correct to TWO decimal places.