You will be paying $9,500 a year in tuition expenses at the end of the next two years. Bonds currently yield 8%. a. What is the present value and duration of your obligation? (Do not round intermediate calculations. Round "Present value" to 2 decimal places and "Duration" to 4 decimal places.) Present value Duration b. What maturity zero-coupon bond would immunize your obligation? (Do not round intermediate calculations. Round "Duration" to 4 decimal places and "Face value" to 2 decimal places.) Duration Face value years Net position years c. Suppose you buy a zero-coupon bond with value and duration equal to your obligation. Now suppose that rates immediately increase to 9%. What happens to your net position, that is, to the difference between the value of the bond and that of your tuition obligation? (Do not round intermediate calculations. Input the amount as a positive value. Round your answer to 2 decimal places.) in value by

You will be paying $9,500 a year in tuition expenses at the end of the next two years. Bonds currently yield 8%. a. What is the present value and duration of your obligation? (Do not round intermediate calculations. Round "Present value" to 2 decimal places and "Duration" to 4 decimal places.) Present value Duration b. What maturity zero-coupon bond would immunize your obligation? (Do not round intermediate calculations. Round "Duration" to 4 decimal places and "Face value" to 2 decimal places.) Duration Face value years Net position years c. Suppose you buy a zero-coupon bond with value and duration equal to your obligation. Now suppose that rates immediately increase to 9%. What happens to your net position, that is, to the difference between the value of the bond and that of your tuition obligation? (Do not round intermediate calculations. Input the amount as a positive value. Round your answer to 2 decimal places.) in value by

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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(Related to Checkpoint 9.2) (Yield to maturity) The Saleemi Corporation's $1,000 bonds pay 5 percent interest annually and have 12 years until maturity. You can purchase the bond for $1,125. a. What is the yield to maturity on this bond? b. Should you purchase the bond if the yield to maturity on a comparable-risk bond is 5 percent?
The Saleemi Corporation's $1,000 bonds pay 6 percent interest annually and have 15 years until maturity. You can purchase the bond for $1,155. a. What is the yield to maturity on this bond? b. Should you purchase the bond if the yield to maturity on a comparable-risk bond is 6 percent? Question content area bottom Part 1 a. The yield to maturity on the Saleemi bonds is enter your response here%.
Consider two bonds, S and T. Both bonds presently are selling at their par value of $100. Bond S will mature in 5 years whereas Bond T will mature in 6 years. If interest rates change such that the yield to maturity on both bonds goes from 6% to 8%, then ____________. Group of answer choices A) Both bonds will decrease in value but bond T will decrease more than bond S B) Both bonds will decrease in value but bond S will decrease more than bond T C) Both bonds will increase in value but bond S will increase more than bond T D) Both bonds will increase in value but bond T will increase more than bond S
A newly issued 10-year maturity, 5% coupon bond making annual coupon payments is sold to the public at a price of $810. The bond will not be sold at the end of the year. The bond is treated as an original-issue discount bond. Required: a. Calculate the constant yield price. (Do not round intermediate calculations. Round your answer to 2 decimal places.) Constant yield price b. What will be an investor's taxable income from the bond over the coming year? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Taxable income
You are considering an investment in 30-year bonds issued by Moore Corporation. The bonds have no special covenants. The Wall Street Journal reports that 1-year T-bills are currently earning 1.50 percent. Your broker has determined the following information about economic activity and Moore Corporation bonds: Real risk-free rate = 0.50% Default risk premium = 1.40% Liquidity risk premium = 1.00% Maturity risk premium = 2.00% a. What is the inflation premium? b. What is the fair interest rate on Moore Corporation 30-year bonds? Note: Round your percentage answers to 2 decimal places (ie., 0.1234 should be entered as 12.34). Expected inflation premium Fair interest rate
A newly issued 10-year maturity, 5% coupon bond making annual coupon payments is sold to the public at a price of $710. The bond will not be sold at the end of the year. The bond is treated as an original - issue discount bond. Required: a. Calculate the constant yield price. (Do not round intermediate calculations. Round your answer to 2 decimal places.) b. What will be an investor's taxable income from the bond over the coming year? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Please answer fast i give upvote
San Miguel Company's 18-year, $1,000 par value bonds pay 6.5 percent interest annually. The market price of the bond is $1,105, and your required rate of return is 8.5 percent. a. Compute the bond's expected rate of return. b. Determine the value of the bond to you given your required rate or return. c. Should you purchase the bond? Why or why not? (*You must show your calculation process as well.)
(Related to Checkpoint 9.2) (Yield to maturity) The Saleemi Corporation's $1,000 bonds pay 7 percent interest annually and have 14 years until maturity. You can purchase the bond for $915. a. What is the yield to maturity on this bond? b. Should you purchase the bond if the yield to maturity on a comparable-risk bond is 7 percent? a. The yield to maturity on the Saleemi bonds is %. (Round to two decimal places.)
Assume that a 5-year bond pays interest of $110 once a year (1 payment/year) and will mature for $1,000. Also assume that the yield to maturity on this bond is currently 12 percent. Given this information, determine the duration of this bond. Enter your answer in decimal format, truncated to 2 decimal places. For example, if your answer is 7.1186 years, enter "7.11".
Calculate the Macaulay duration of a 9%, $1,000 par bond that matures in three years if the bond's YTM is 12% and interest is paid semiannually. a. Calculate this bond's modified duration. Do not round intermediate calculations. Round your answer to two decimal places. years b. Assuming the bond's YTM goes from 12% to 11.5%, calculate an estimate of the price change. Do not round intermediate calculations. Round your answer to three decimal places. Use a minus sign to enter negative value, if any. %
Calculate the Macaulay duration of an 8%, $1,000 par bond that matures in three years if the bond's YTM is 12% and interest is paid semiannually. I have the answer, 2.71 Calculate this bond's modified duration. Do not round intermediate calculations. Round your answer to two decimal places. Assuming the bond's YTM goes from 12% to 10.5%, calculate an estimate of the price change. Do not round intermediate calculations. Round your answer to three decimal places. Use a minus sign to enter a negative value, if any. This is the question I'm struggling to find.
The Saleemi Corporation's $1000 bonds pay 7 percent interest annually and have 14 years until maturity. You can purchase the bond for $1,095. a. What is the yield to maturity on this bond? b. Should you purchase the bond if the yield to maturity on a comparable-risk bond is 4 percent? ___________________________________________________________________________a. The yield to maturity on the Saleemi bond is ____ %. (Round to two decimal places.)

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