Gitman: Principl Manageri Finance_15 (15th Edition) (What's New in Finance)
15th Edition
ISBN: 9780134476315
Author: Chad J. Zutter, Scott B. Smart
Publisher: PEARSON
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Textbook Question
Chapter 6, Problem 6.8WUE
Assume a 5-year Treasury bond has a coupon rate of 4.5%.
a. Give examples of required
b. If this bond’s par value is $10,000, calculate the differing values for this bond given the required rates you chose in part a.
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If you have a coupon bond, its face value is $1,000 and the coupon rate is 4%. Complete the following table, then calculate the rate of return for the bond. If you know that it was purchased at the nominal value, comment on the results.
due date
return at maturity
the price
2
0.02
3
0.04
5
0.06
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Annuity
value
%
n
value
%
n
0.961
0.02
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1.97
0.02
2
0.925
0.04
2
1.89
0.04
2
0.889
0.04
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0.04
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0.906
0.02
5
4.71
0.02
5
0.747
0.06
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4.21
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5
Suppose you want to figure out the relationship between duration and maturity, so you consider the following
three T-Bonds. You compute a. The duration of a two-year Treasury bond with a 10 percent semiannual
coupon selling at par b. The duration of a three-year Treasury bond with a 10 percent semiannual coupon
selling at par c. The duration of a four-year Treasury bond with a 10 percent semiannual coupon selling at par
Consider the following bonds:
•Bond A: A 2-year zero-coupon bond with a face value of $100 and 6% YTM.
•Bond B: A 2-year par-value bond with a face value of $100 and 6% coupon rate.
*Bond C: A 2-year par-value bond with a face value of $100 and 7% coupon rate.
Suppose the yield curve shifts upwards by one percent. Which bond among bonds A, B, and C will
experience the largest percentage price change? Which will have the lowest percentage price change?
O a. Bond A; Bond C
O b. Bond A; Bond B
O c.
Bond B; Bond C
O d. Bond C; Bond B
Chapter 6 Solutions
Gitman: Principl Manageri Finance_15 (15th Edition) (What's New in Finance)
Ch. 6.1 - What is the real rate of interest? Differentiate...Ch. 6.1 - What is the term structure of interest rates, and...Ch. 6.1 - For a given class of similar-risk securities, what...Ch. 6.1 - Prob. 6.4RQCh. 6.1 - List and briefly describe the potential issuer-...Ch. 6.2 - What are typical maturities, denominations, and...Ch. 6.2 - Differentiate between standard debt provisions and...Ch. 6.2 - How is the cost of bond financing typically...Ch. 6.2 - Prob. 6.9RQCh. 6.2 - Prob. 6.10RQ
Ch. 6.2 - Compare the basic characteristics of Eurobonds and...Ch. 6.3 - Why is it important for financial managers to...Ch. 6.3 - Prob. 6.13RQCh. 6.3 - Prob. 6.14RQCh. 6.3 - Prob. 6.15RQCh. 6.4 - Prob. 6.16RQCh. 6.4 - What relationship between the required return and...Ch. 6.4 - If the required return on a bond differs from its...Ch. 6.4 - As a risk-averse investor, would you prefer bonds...Ch. 6.4 - What is a bonds yield to maturity (YTM)? Briefly...Ch. 6 - Learning Goals 5, 6 ST6- 1 Bond valuation Lahey...Ch. 6 - Learning Goal 1 E6-1 The nominal, risk-free rate...Ch. 6 - The yields for Treasuries with differing...Ch. 6 - The YTMs for Treasuries with differing maturities...Ch. 6 - Assume that the rate of inflation expected over...Ch. 6 - Calculate the risk premium for each of the...Ch. 6 - You have two assets and must calculate their...Ch. 6 - Prob. 6.7WUECh. 6 - Assume a 5-year Treasury bond has a coupon rate of...Ch. 6 - Interest rate fundamentals: The real rate of...Ch. 6 - Prob. 6.2PCh. 6 - Prob. 6.3PCh. 6 - Yield curve A firm wishing to evaluate interest...Ch. 6 - Term structure of interest rates The following...Ch. 6 - Bond interest payments before and after taxes...Ch. 6 - Prob. 6.11PCh. 6 - Prob. 6.13PCh. 6 - Prob. 6.14PCh. 6 - Bond valuation: Annual interest Calculate the...Ch. 6 - Prob. 6.20PCh. 6 - Bond valuation: Semiannual interest Find the value...
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What happens to my bond when interest rates rise?; Author: The Financial Pipeline;https://www.youtube.com/watch?v=6uaXlI4CLOs;License: Standard Youtube License