INVESTMENTS(LL)W/CONNECT
11th Edition
ISBN: 9781260433920
Author: Bodie
Publisher: McGraw-Hill Publishing Co.
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Question
Chapter 14, Problem 13PS
Summary Introduction
To Discuss:
To fill in the table below for the following zero-coupon bonds, all of which have par values of $1000
PRICE | MATURITY(YEARS) | YIELD TO MATURITY |
$400 |
20 |
(a) |
$500 |
20 |
(b) |
$500 |
10 |
(c) |
(d) |
10 |
10% |
(e) |
10 |
8% |
$400 |
(f) |
8% |
Introduction:
A bond is a security that creates an obligation on the issuer to make specified payments to the holder for a given period of time. The face value of the bond is the amount that the holder will receive on maturity along with the coupon rate which is also known as the interest rate of the bond.
A zero-coupon bond is a bond where at the time of maturity the face value is repaid.
Yield to maturity is termed as the discount rate which makes the present payments from the bond and its price as equal. In simple terms, it is the average
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Given the coupons, par values, market rates and market prices below, please calculate the prices for
bonds A-D and the yields for bonds D-G.
Coupon
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0.5
1.0
1.5
2.0
2.5
3.0
3.5
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4.5
5.0
5.5
Given the coupons, par values, market rates and market prices below, please calculate the prices for bonds A-D and the yields for bonds D-G.
F
3.25%
6.0
6.5
7.0
B
7.5
8.0
2.1%
с
1.8%
B
2.6%
3.0%
2.8%
E
3.1%
D
0.0%
1,000
F
2.4%
Coupon
Par Value
Cash flows:
Market price
Yield
0.5
1.0
1.5
INNM m 4 t
nosono
2.0
2.5
3.0
3.5
4.0
4.5
5.0
H
5.5
6.0
6.5
7.0
7.5
8.0
2.40%
(921)
4.40%
(762)
K
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G
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1,000
(449)
The following table summarizes prices of various default-free zero-coupon bonds ( $100 face value): Maturity (years) 1 2 3 4 5 {:[" Price (per "$100],[" face value) "]:} $96.33 $91.98 $87.41 $82.53 $77.41 a. Compute the yield to maturity for each bond. b. Plot the zero-coupon yield curve (for the first five years). c. Is the yield curve upward-sloping, downward-sloping, or flat? Note: Assume annual compounding. a. Compute the yield to maturity for each bond. The yield on the 1-year bond is %. (Round to two decimal places.) The yield on the 2-year bond is %. (Round to two decimal places.) The yield on the 3-year bond is %. (Round to two decimal places.) The yield on the 4-year bond is enter your response here%. (Round to two decimal places.) Part 5 The yield on the 5-year bond is enter your response here%. (Round to two decimal places.)
Note:-
Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism.
Answer completely.
You will…
The following table summarizes the prices of various default-free zero-coupon bonds (expressed as a percentage of the face value):
a. Compute the yield to maturity for each bond.
b. Plot the zero-coupon yield curve (for the first five years).
c. Is the yield curve upward sloping, downward sloping, or flat?
Chapter 14 Solutions
INVESTMENTS(LL)W/CONNECT
Ch. 14 - Prob. 1PSCh. 14 - Prob. 2PSCh. 14 - Prob. 3PSCh. 14 - Prob. 4PSCh. 14 - Prob. 5PSCh. 14 - Prob. 6PSCh. 14 - Prob. 7PSCh. 14 - Prob. 8PSCh. 14 - Prob. 9PSCh. 14 - Prob. 10PS
Ch. 14 - Prob. 11PSCh. 14 - Prob. 12PSCh. 14 - Prob. 13PSCh. 14 - Prob. 14PSCh. 14 - Prob. 15PSCh. 14 - Prob. 16PSCh. 14 - Prob. 17PSCh. 14 - Prob. 18PSCh. 14 - Prob. 19PSCh. 14 - Prob. 20PSCh. 14 - Prob. 21PSCh. 14 - Prob. 22PSCh. 14 - Prob. 23PSCh. 14 - Prob. 24PSCh. 14 - Prob. 25PSCh. 14 - Prob. 26PSCh. 14 - Prob. 27PSCh. 14 - Prob. 28PSCh. 14 - Prob. 29PSCh. 14 - Prob. 30PSCh. 14 - Prob. 31PSCh. 14 - Prob. 1CPCh. 14 - Prob. 2CPCh. 14 - Prob. 3CPCh. 14 - Prob. 4CPCh. 14 - Prob. 5CP
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