Question
In: Finance
An 8% coupon bond with 3 years to maturity has a yield of 7%. Assume that...
An 8% coupon bond with 3 years to maturity has a yield of 7%. Assume that coupon is paid semi-annually and face value is $1,000.
(a) Calculate the price of the bond. (Keep 2 decimal places,
e.g. 90.12)
(b) Calculate the duration of the bond. (Keep 4 decimal places,
e.g. 5.1234)
(c) Calculate this bond's modified duration. (Keep 4 decimal
places, e.g. 5.1234)
(d) Assume that the bond's yield to maturity increases from 7% to
7.2%, estimate the new price of the bond.
(Keep 2 decimal places, e.g. 90.12)
Solutions
jeff jeffy answered 6 months agoRelated Solutions
An 8% coupon bond with 3 years to maturity has a yield of 7%. Assume that...
An 8% coupon bond with 3 years to maturity has a yield of 7%.
Assume that coupon is paid semi-annually
and face value is $1,000.
(a) Calculate the price of the bond. (Keep 2 decimal places,
e.g. 90.12)
(b) Calculate the duration of the bond. (Keep 4 decimal places,
e.g. 5.1234)
(c) Calculate this bond's modified duration. (Keep 4 decimal
places, e.g. 5.1234)
(d) Assume that the bond's yield to maturity increases from 7% to
7.2%, estimate the new price...
A zero-coupon bond with 4 years to maturity and the yield to maturity of 8%. When...
A zero-coupon
bond
with 4 years to
maturity and the yield to maturity of 8%. When the yield
increases,
the duration
of this bond
decreases.
a. True b.
False
2) A bond issuer often
repurchases Callable
bonds for
a discount
bond.
a. True b.
False
Credit
Default Swap (CDS) is an insurance policy on default
risk of corporate bond or loan.
a. True b.
False
4) The delivery of the
underlying asset is seldom made in forward
contracts while the...
A bond has a maturity of 10 years, has 8% coupon rate(paid annually) and the yield...
A bond has a maturity of 10 years, has 8% coupon rate(paid
annually) and the yield to maturity is 10%. WHat is the price of
the bond? (face value is 1000)
Bond Coupon Rate Yield Maturity Duration A 7% 3.5% 4 Years B Zero Coupon 5.25% 8...
Bond
Coupon Rate
Yield
Maturity
Duration
A
7%
3.5%
4 Years
B
Zero Coupon
5.25%
8 Years
A) Compute the duration of each bond, assuming annual interest
payments for the coupon bonds. Show your work below. (10
points)
B) What is the duration-predicted price change for each bond for
a 1% increase in rates? Show your work below. (15 points)
A 12 year bond 1000 face value bond has an 8% annual coupon and a yield to maturity of 7%
A 12 year bond 1000 face value bond has an 8% annual coupon
and a yield to maturity of 7%, what will be the price of the bond 3
years from today?
Calculate the price of this bond: Yield = 5.55%, Time to maturity = 7 years, Coupon...
Calculate the price of this bond: Yield = 5.55%, Time to
maturity = 7 years, Coupon rate = 4.6%, Pays = annually.
948.85
990.87
690.83
946.11
None of the above
A zero coupon bond with 2.5 years to maturity has a annualized yield to maturity of...
A zero coupon bond with 2.5 years to maturity has a annualized
yield to maturity of 5%. A 3-year maturity annual-pay coupon bond
has as face value of $1000 and a 5% coupon rate. The coupon bond
also has a yield to maturity of 5%.
Please calculate the duration of each bond. Which bond has the
higher duration and why?
Using the formula that approximates bond price change as a
function of the duration, please calculate the price change of...
A ten year bond has a coupon rate of 7% and a yield to maturity of...
A ten year bond has a coupon rate of 7% and a yield to maturity
of 9%, will you be willing to pay $1100 for this bond. Please
explain.
Assume you own a bond with a 5% coupon, a 6% yield-to-maturity, 5 years to maturity,...
Assume you own a bond with a 5% coupon, a 6% yield-to-maturity,
5 years to maturity, and a $1,000 par value. It is currently priced
at $957.35. If the yield-to-maturity increases to 8.0%, what is the
price of the bond? Select one: a. $1,043.76 b. $878.33 c. $1,000 d.
$1,087.52
Consider a bond with a 10% coupon and with yield to maturity = 8%. If the...
Consider a bond with a 10% coupon and with yield to maturity =
8%. If the bond’s YTM remains constant, then in one year, will the
bond price be higher, lower, or unchanged? Please explain your
answer and give examples to help demonstrate your
explanation.
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