You hold a zero coupon bond when there is a sudden change in interest rates. It has 17 years to maturity. Yield to maturity is 0.055, and rates change by FALLING -0.008 overnight. By how much does your bond change in value as a percentage or decimal? (Zero coupon bonds assume semi-annual compounding.)

You hold a zero coupon bond when there is a sudden change in interest rates. It has 17 years to maturity. Yield to maturity is 0.055, and rates change by FALLING -0.008 overnight. By how much does your bond change in value as a percentage or decimal? (Zero coupon bonds assume semi-annual compounding.)

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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Question 4 The following is a list of prices today for bonds with different maturities. Face value is 100. Assume that the bonds pay their coupons annually, and that the YTMs in the table are annualized and compounded annually. Both coupon rate and yield to maturity (YTM) is in percent. Maturity (years) Price Coupon rate YTM 1 98.00 0 ?2 100 ? 5.00 3?9 6.00 Fill in the missing values in the table.What are the annualized spot rates for years 1 & 2 (r1 & r2)? Given r1 & r2, what is the price of a 2-year coupon bond with annual coupon rate of 7%? What is the duration of this bond?
K Assume that a bond will make payments every six months as shown on the following timeline (using six-month periods): 0 2 5 Period $19.53 a. What is the maturity of the bond (in years)? b. What is the coupon rate (as a percentage)? c. What is the face value? Cash Flows View an example Get more help. ★ a. What is the maturity of the bond (in years)? The maturity is years. (Round to the nearest integer.) A 6 1 MacBook Pro & 7 $19.53 * 8 9 C 59 $19.53 60 $19.53+$1,000 Clear all BUB 0 {
5 The YTM on a bond is the interest rate you earn on your investment if interest rates don't change. If you actually sell the bond before it matures, your realized return is known as the holding period yield (HPY). a. Suppose that today you buy an annual coupon bond with a coupon rate of 8.2 percent for $845. The bond has 10 years to maturity and a par value of $1,000. What rate of return do you expect to earn on your investment? Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16. b-1. Two years from now, the YTM on your bond has declined by 1 percent, and you decide to sell. What price will your bond sell for? Note: Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16. b-2. What is the HPY on your investment? Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16. eBook a. Rate of return b-1. Price b-2. Holding…
Question 7 You hold an annual coupon bond for 1 year, receiving the 0.14 coupon before selling. When bought it had 6 years to maturity, and the YTM was 0.095. Over the year, interest rates ROSE by 0.002What is the total holding period return for this investment? Group of answer choices 0.0939 0.0856 0.0903 0.0879 0.0820
D6 Assume you own a 2-year US Treasury Note with a 5% coupon and a 7-year US Treasury Note with a 0% coupon. If market interest rates decrease by 100 basis points in the 2-year maturity and declined by only 75 basis points in the 7-year maturity, which bond would experience the smallest market value change? a. 5% US Treasury due in 2 years b. 0% US Treasury due in 7 years c. Both would change by the same amount d. Prices would not change since the coupons are fixed
6. Pure expectations theory The pure expectations theory, or the expectations hypothesis, asserts that long-term interest rates can be used to estimate future short-term interest rates. A. Based on the pure expectations theory, is the following statement true or false? The pure expectations theory assumes that a one-year bond purchased today will have the same return as a one-year bond purchased five years from now. False True B. The yield on a one-year Treasury security is 5.8400%, and the two-year Treasury security has a 8.7600% yield. Assuming that the pure expectations theory is correct, what is the market’s estimate of the one-year Treasury rate one year from now? (Note: Do not round your intermediate calculations.) 14.936% 13.4071% 11.7606% 9.9965% C. Recall that on a one-year Treasury security the yield is 5.8400% and 8.7600% on a two-year Treasury security. Suppose the one-year security does not have a…
The yield curve for default-free zero-coupon bonds is currently as follows: Maturity (years) 1 2 3 YTM 9% 11 13 Assume that the pure expectations hypothesis of the term structure is correct. What is the market expectation for the YTM of a one-year zero-coupon bond to be issued a year from now? Enter your answer as a percentage. For example, if your answer is 0.1234 or 12.34%, enter "12.34".
Jattempt tDA ourd A zero-coupon bond is a debt instrument that offers no return on investment. (A True B False Question 4 0.5 Points An annuity discount factor for 8 percent at three years, is the sum of the present value factors for 8 percent at one, two, and three years. True B. False Question 5 0.5 Points The intrinsic value of a security A always exceeds its book value rises when the liquidation value falls is the price around which its market value should closely fluctuate None of the above
Abend las a duration of 6.222 and the current yield-to inaturity i5.39%if the cument bonds peice is51,150.17what is predicted to be the bond new price if interest rates suddenly iomp upwards by 0.57e? State your anwer as a dollar amount with two decimal places
3SIDIE 02 (Yleld to maturity) A bond's market price is $1,200. It has a $1,000 par value, will mature in 6 years, and has a coupon interest rate of 11 percent annual interest, but makes its interest payments semiannually. What is the bond's yield to maturity? What happens to the bond's yield to maturity if the bond matures in 12 years? What if it matures in 3 years? 02 a. The bond's yield to maturity if it matures in 6 years is %. (Round to two decimal places.) b. The bond's yield to maturity if it matures in 12 years is %. (Round to two decimal places.) 11 c. The bond's yield to maturity if it matures in 3 years is %. (Round to two decimal places.) 11 04 11 04 11 Enter your answer in each of the answer boxes.
Bond ABCD Coupon Rate (annual payments) 0.0% 0.0% 3.7% 7.7% Maturity (years) 15 10 15 10 What is the percentage change in the price of each bond if its yield to maturity falls from 6.2% to 5.2%?
Ins 8. Suppose that today's interest rate on 1-year bonds is 4% (i10 year bonds next year, in two years, and in three years are expected to be 5%, 6%, and 7%, respectively. 0.04). Interest rates on 1- ha a. According to the Expectations Theory of Term Structure, what are the equilibrium interest rates today for otherwise comparable 2-year, 3-year, and 4-year bonds? b. Draw the yield curve for that case. or

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