(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 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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Answer 1

Question

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 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.

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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Lara Fredericks is interested in two mutually exclusive investments. Both investments cover the same time horizon of 5 years. The cost of the first investment is $9900, and Lara expects equal and consecutive year-end payments of $3400. The second investment promises equal and consecutive payments of $4100 with an initial outlay of $12500 required. The current required return on the first investment is 8.4 %, and the second carries a required return of 10.4 %.a. What is the net present value of the first investment?b. What is the net present value of the second investment?c. Being mutually exclusive, which investment should Lara choose? d. Which investment is relatively more risky? Explain.

Answer 2

Question

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 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.

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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Answer 3

Question

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 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.

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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Answer 4

Question

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 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.

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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Answer 5

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 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.

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.

Answer 6

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 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.

Answer 7

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 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.

Answer 8

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.

Answer 9

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.

Answer 10

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Answer 13

Ch. 16 - Prob. 1PS Ch. 16 - Prob. 2PS Ch. 16 - Prob. 3PS Ch. 16 - Prob. 4PS Ch. 16 - Prob. 5PS Ch. 16 - Prob. 6PS Ch. 16 - Prob. 7PS Ch. 16 - Prob. 8PS Ch. 16 - Prob. 9PS Ch. 16 - Prob. 10PS

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