Consider a 4-year, 5% annual coupon bond with a face value of $10,000, which was issued...

Consider a 4-year, 5% annual coupon bond with a face value of $10,000, which was issued three years ago. The bond just paid the coupon. Therefore, this bond has one year to maturity, and the next payment of the face and coupon will be made in exactly one year, after which the bond will cease to exist. If the bond defaults before next year, it will pay total of $8,000 in one year. The effective 1-year risk-free rate is 3.55%. If the bond is currently selling at $9,501.50, compute the risk-neutral probability that the bond will default within one year..

Expert Solution

ekkarill92 answered 2 years ago

For a ten-year 20% coupon bond with a face value of $10,000, the annual coupon payment...

For a ten-year 20% coupon bond with a face value of $10,000, the annual coupon payment is $100 $200 $1,000 $2,000

Consider a 5-year 4% coupon bond with face value of $1,000paying semi-annual coupons. How many...

Consider a 5-year 4% coupon bond with face value of $1,000 paying semi-annual coupons. How many coupon payments will there be in total? Enter answer as a whole number.

Consider a bond that has a $10,000 face value and a coupon rate of 4%. Show...

Consider a bond that has a $10,000 face value and a coupon rate of 4%. Show the expression to find the price and find the price in each of the following cases: 1. The bond has one year to maturity and the interest rate is 3%. 2. The bond has one year to maturity and the interest rate is 5%. 3. The bond has two years to maturity and the interest rate is 3%. 4. The bond has two years...

Consider a 10-year bond with a face value of $100 that pays an annual coupon of...

Consider a 10-year bond with a face value of $100 that pays an annual coupon of 8%. Assume spot rates are flat at 5%. a.Find the bond’s price and modified duration. b.Suppose that its yields increase by 10bps. Calculate the change in the bond’s price using your bond pricing formula and then using the duration approximation. How big is the difference? c.Suppose now that its yields increase by 200bps. Repeat your calculations for part b.

Consider the following bond issued by Halliburton: coupon rate: 2.067%, with semi-annual coupon payments Face value:...

Consider the following bond issued by Halliburton: coupon rate: 2.067%, with semi-annual coupon payments Face value: $1,000 Maturity date: August 1, 2023 Assume that today is August 2, 2016. Suppose, for the sake of argument, that the annual discount rate is 7.636%, with semi-annual compounding. What is the value of the bond? Do not round at intermediate steps in your calculation. Round your answer to the nearest penny. Do NOT include a minus sign! Do not type the $ symbol.

Consider the following bond issued by Halliburton: -coupon rate: 3.618%, with semi-annual coupon payments -Face value:...

Consider the following bond issued by Halliburton: -coupon rate: 3.618%, with semi-annual coupon payments -Face value: $1,000 -Maturity date: August 1, 2023 Assume that today is August 2, 2016. Suppose, for the sake of argument, that the annual discount rate is 7.899%, with semi-annual compounding. What is the value of the bond? Do not round at intermediate steps in your calculation. Round your answer to the nearest penny. Do NOT include a minus sign! Do not type the $ symbol.

Consider the following bond issued by Halliburton: coupon rate: 8.294%, with semi-annual coupon payments Face value:...

Consider the following bond issued by Halliburton: coupon rate: 8.294%, with semi-annual coupon payments Face value: $1,000 Maturity date: August 1, 2023 Assume that today is August 2, 2016. Suppose, for the sake of argument, that the annual discount rate is 2.01%, with semi-annual compounding. What is the value of the bond? Do not round at intermediate steps in your calculation. Round your answer to the nearest penny. Do NOT include a minus sign! Do not type the $ symbol.

Consider a one-year, 10 percent coupon bond with a face value of $1,000 issued by a...

Consider a one-year, 10 percent coupon bond with a face value of $1,000 issued by a private corporation. The one-year risk-free rate is 10 percent. The corporation has hit on hard times, and the consensus is that there is a 20 percent probability that it will default on its bonds. If an investor were willing to pay at most $775 for the bond, is that investor risk neutral or risk averse?

1. A 5 year bond (with $1,000 face value) was issued with an unusual coupon payment...

1. A 5 year bond (with $1,000 face value) was issued with an unusual coupon payment schedule. The company promises to pay the following amounts as coupon interest each year: Time 1 $45 Time 2 $55 Time 3 $65 Time 4 $75 Time 5 $85 (The company will also pay back the face value in time 5). (a) Find the exact bond price if YTM = 6.5%. Show your work (b ) Explain using time value of money principles...

A 5-year bond with a face value of $1,000 pays a coupon of 4% per year...

A 5-year bond with a face value of $1,000 pays a coupon of 4% per year (2% of face value every six months). The reported yield to maturity is 3% per year (a six-month discount rate of 3/2 =1.5%). What is the present value of the bond?

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