Investments
11th Edition
ISBN: 9781259277177
Author: Zvi Bodie Professor, Alex Kane, Alan J. Marcus Professor
Publisher: McGraw-Hill Education
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Chapter 16, Problem 21PS
Summary Introduction
(a)
To Discuss:
To use a spreadsheet to calculate the duration of the two bonds in Spreadsheet 11.1 if the market interest rate increases to 12%.The explanation of the reason of the fall in the duration of the coupon bond while the duration of the zero-coupon bond remaining unchanged is to be given.
Spreadsheet 11.1
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 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 the face value is repaid at the time of maturity.
Yield to maturity means the discount rate which makes the present payments from the bond equal to the price, in simple terms it is the average
Summary Introduction
(b)
To Discuss:
To use the same spreadsheet to calculate the duration of the coupon bond if the coupon were 12% instead of 8%.The explanation of the reason of the duration of the coupon bond being lower is to be given.
Spreadsheet 11.1
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 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 the face value is repaid at the time of maturity.
Yield to maturity means the discount rate which makes the present payments from the bond equal to the price, in simple terms it is the average rate of return a holder can expect from that bond. Duration is a measure of the sensitivity of the price -- the value of principal -- of a bond to a change in interest rates. The duration of a zero-coupon bond is equal to the time to maturity of the bond.
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Chapter 16 Solutions
Investments
Ch. 16 - Prob. 1PSCh. 16 - Prob. 2PSCh. 16 - Prob. 3PSCh. 16 - Prob. 4PSCh. 16 - Prob. 5PSCh. 16 - Prob. 6PSCh. 16 - Prob. 7PSCh. 16 - Prob. 8PSCh. 16 - Prob. 9PSCh. 16 - Prob. 10PS
Ch. 16 - Prob. 11PSCh. 16 - Prob. 12PSCh. 16 - Prob. 13PSCh. 16 - Prob. 14PSCh. 16 - Prob. 15PSCh. 16 - Prob. 16PSCh. 16 - Prob. 17PSCh. 16 - Prob. 18PSCh. 16 - Prob. 19PSCh. 16 - Prob. 20PSCh. 16 - Prob. 21PSCh. 16 - Prob. 22PSCh. 16 - Prob. 23PSCh. 16 - Prob. 24PSCh. 16 - Prob. 25PSCh. 16 - Prob. 1CPCh. 16 - Prob. 2CPCh. 16 - Prob. 3CPCh. 16 - Prob. 4CPCh. 16 - Prob. 5CPCh. 16 - Prob. 6CPCh. 16 - Prob. 7CPCh. 16 - Prob. 8CPCh. 16 - Prob. 9CPCh. 16 - Prob. 10CPCh. 16 - Prob. 11CPCh. 16 - Prob. 12CPCh. 16 - Prob. 13CP
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Bond Valuation - A Quick Review; Author: Pat Obi;https://www.youtube.com/watch?v=xDWTPmqcWW4;License: Standard Youtube License