Intermediate Financial Management
14th Edition
ISBN: 9780357516782
Author: Brigham, Eugene F., Daves, Phillip R.
Publisher: Cengage Learning
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Chapter 24, Problem 2P
A Treasury bond futures contract has a settlement price of 89’08. What is the implied annual yield?
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- A bond has a yield to maturity of 9.28 percent. If the inflation rate is 2.0 percent, what is the real rate of return on the bond?arrow_forwardThe rate of return on a bond held to its maturity date is called the bonds yield to maturity. If interest rates in the economy rise after a bond has been issued, what will happen to the bonds price and to its YTM? Does the length of time to maturity affect the extent to which a given change in interest rates will affect the bonds price? Why or why not?arrow_forwardA bond that pays interest semiannually has a price of $981.73 and a semiannual coupon payment of $27.75. If the par value is $1,000, what is the current yield?arrow_forward
- What is interest rate (or price) risk? Which bondhas more interest rate risk: an annual payment1-year bond or a 10-year bond? Why?arrow_forwardAssume that the real risk-free rate is 2% and the average annual expected inflation rate is 4%. The DRP and LP for Bond A are each 2%, and the applicable MRP is 3%. What is Bond A's interest rate?arrow_forwardAssume the real risk-free is 1% and the average annual expected inflation rate is 4%. The DRP and LP for bond A are each 3%, and the applicable MRP is 3%. What is Bond A's interest rate?arrow_forward
- Assume that the real risk free rate is 3% and the average annual expected inflation rate is 5%. The DRP and LP for Bond A are each 1% and the applicable MRP is 2%. What is bond A’s interest rate?arrow_forwardComment on the attractiveness of the bonds in two ways: a) How does the yield compare to the benchmark? Market YTM: 3.62% YTM of bond: 3.72% b) How does the current price compare to the benchmark-yield implied price? Price: 100.875 Implied price: 100.923arrow_forwardWhat is the default risk premium on Aaa corporate bond, if the interest rate on that bond is 3.25 percent and the interest rate on a Treasury security is 1.16 percent?arrow_forward
- A bond that pays interest semiannual has a price of 981.45 and semiannual coupon payment of 28.50. If the par value is 1000. What is the current yield?arrow_forwardA bond has a 6.5% yield to maturity and coupons paid semiannually. What is the bond's effective annual yield (EAY)?arrow_forwardThe yield on a zero-coupon bond of maturity Tis equal to: the return on the bond each period, if the bond is held until maturity the expected return on the zero-coupon bond the forward rate for time T-1 the forward rate for time T the spot rate of interestarrow_forward
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