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An investor buys a 10 year, 8% annual coupon bond at par (so
the yield-to-maturity must be 8%), and sells it after three years
(just after the coupon is recieved). Interest rates rise
immediately after the purchase, and the bond’s yield-to-maturity
jumps to 10% and remains there for the rest of the three year
period. Assume coupons are reinvested at the new
yield-to-maturity.
Show the components of the investor’s “total return,” or
portfolio value at the end of the...
Peter purchased a 10-year corporate bond with an 8% annual
coupon and the yield-to-maturity (YTM) was 10% three years ago.
Today, Peter just received the third coupon payment. Due to a
financial emergency, Peter is forced to sell the bond today at a
price of $1,100.
(a) Determine the annual rate of return (APR) Peter can earn if
he held the bond to maturity.
(b) At what price should Peter buy the bond? [Round your final
answer to 2 d.p.]...
A 14.55-year maturity zero-coupon bond selling at a yield to
maturity of 7% (effective annual yield) has convexity of 197.7 and
modified duration of 13.60 years. A 40-year maturity 5% coupon bond
making annual coupon payments also selling at a yield to maturity
of 7% has nearly identical modified duration—-13.96 years—but
considerably higher convexity of 338.8.
a. Suppose the yield to maturity on both bonds
increases to 8%.
What will be the actual percentage capital loss on each
bond?
What...
A 12.25-year maturity zero-coupon bond selling at a yield to
maturity of 8% (effective annual yield) has convexity of 139.2 and
modified duration of 11.34 years. A 40-year maturity 6% coupon bond
making annual coupon payments also selling at a yield to maturity
of 8% has nearly identical modified duration—-12.30 years—but
considerably higher convexity of 272.9.
a. Suppose the yield to maturity on both bonds increases to 9%.
What will be the actual percentage capital loss on each bond? What...
A 12.75-year maturity zero-coupon bond selling at a yield to
maturity of 8% (effective annual yield) has convexity of 150.3 and
modified duration of 11.81 years. A 30-year maturity 6% coupon bond
making annual coupon payments also selling at a yield to maturity
of 8% has nearly identical duration—11.79 years—but considerably
higher convexity of 231.2.
Suppose the yield to maturity on both bonds increases to 9%.
What will be the actual percentage capital loss on each bond? What
percentage capital...
A 13.05-year maturity zero-coupon bond selling at a yield to
maturity of 8% (effective annual yield) has convexity of 120.2 and
modified duration of 11.91 years. A 40-year maturity 6% coupon bond
making annual coupon payments also selling at a yield to maturity
of 8% has nearly identical modified duration—-11.65 years—-but
considerably higher convexity of 280.2.
a.
Suppose the yield to maturity on both bonds increases to 9%.
What will be the actual percentage capital loss on each bond? What...
A 13.05-year maturity zero-coupon bond selling at a yield to
maturity of 8% (effective annual yield) has convexity of 157.2 and
modified duration of 12.08 years. A 40-year maturity 6% coupon bond
making annual coupon payments also selling at a yield to maturity
of 8% has nearly identical modified duration—-12.30 years—-but
considerably higher convexity of 272.9.
a. Suppose the yield to maturity on both bonds
increases to 9%. What will be the actual percentage capital loss on
each bond? What...
A 13.35-year maturity zero-coupon bond selling at a yield to
maturity of 8% (effective annual yield) has convexity of 164.2 and
modified duration of 12.36 years. A 40-year maturity 6% coupon bond
making annual coupon payments also selling at a yield to maturity
of 8% has nearly identical modified duration—-12.30 years—-but
considerably higher convexity of 272.9.
a. Suppose the yield to maturity on both bonds
increases to 9%. What will be the actual percentage capital loss on
each bond? What...
A 10 year 1000 bond with 7% semi-annual coupons is bought for a
price to yield 6.5% conv. semiannually. It is bought on Feb 1,
2003. Find the actual selling price on Dec. 31, 2003. Find the
price quoted in paper (full) on Dec 31, 2003. Use 30/360.