Consider a 12-year bond with face value $1,000 that pays an 8.6% coupon semi-annually and has...

Consider a 12-year bond with face value $1,000 that pays an 8.6% coupon semi-annually and has a yield-to-maturity of 7.7%. What is the approximate percentage change in the price of bond if interest rates in the economy are expected to decrease by 0.60% per year? Submit your answer as a percentage and round to two decimal places. (Hint: What is the expected price of the bond before and after the change in interest rates?)

please

(i) Describe and interpret the assumptions related to the problem.

(ii) Apply the appropriate mathematical model to solve the problem.

(iii) Calculate the correct solution to the problem.

Expert Solution

SEE THE IMAGE. ANY DOUBTS, FEEL FREE TO ASK. THUMBS UP PLEASE

jeff jeffy answered 2 years ago

Consider a 7-year bond with face value $1,000 that pays an 8.4% coupon semi-annually and has...

Consider a 7-year bond with face value $1,000 that pays an 8.4% coupon semi-annually and has a yield-to-maturity of 6.9%. What is the approximate percentage change in the price of bond if interest rates in the economy are expected to increase by 0.40% per year? Submit your answer as a percentage and round to two decimal places. (Hint: What is the expected price of the bond before and after the change in interest rates?) Can you please explain with FV,...

Consider a 10 year bond with face value $1,000 that pays a 6.8% coupon semi-annually and...

Consider a 10 year bond with face value $1,000 that pays a 6.8% coupon semi-annually and has a yield-to-maturity of 8.4%. What is the approximate percentage change in the price of bond if interest rates in the economy are expected to decrease by 0.60% per year? Submit your answer as a percentage and round to two decimal places. (Hint: What is the expected price of the bond before and after the change in interest rates?) To answer the question: (1)...

Consider a 11-year, corporate bond with face value $1,000 that pays semi-annual coupon. With the nominal...

Consider a 11-year, corporate bond with face value $1,000 that pays semi-annual coupon. With the nominal yield-to-maturity equal to 10%, the bond is selling at $802.5550. Find the coupon rate for this bond. Assume that the market is in equilibrium so that the fair value of the bond is equal to the market price of the bond.

A 7 percent coupon bond has a face value of $1,000 and pays interest annually. The...

A 7 percent coupon bond has a face value of $1,000 and pays interest annually. The current yield is 7.3 percent. What is the current price of this bond?

A coupon bond that pays interest semi-annually has a par value of $1,000, matures in seven...

A coupon bond that pays interest semi-annually has a par value of $1,000, matures in seven years, and has a yield to maturity of 9.3%. The price of the bond today will be ________ if the coupon rate is 9.5%.

AFRICANA’s 30- year bond pays 12 percent coupon interest semi-annually and has a par value of...

AFRICANA’s 30- year bond pays 12 percent coupon interest semi-annually and has a par value of sh1, 000. If the bond currently selling at par, what is the bond’s yield to maturity (YTM) using the approximate method? [3 Marks] [c] What is the value of a preferred stock where the dividend rate is 16% percent on aSh100 par value? The appropriate discount rate for a stock of this risk level is 12 percent. [1 Mark] [d] Investors require a 15%...

Problem 5: Bond A pays 12% coupon annually, has a par value of $1,000 and will...

Problem 5: Bond A pays 12% coupon annually, has a par value of $1,000 and will mature in 3 years. Using a 10% discount rate (Yield-to-Maturity), what is the value of the bond? Problem 6: Using your information on Bond A above, calculate the (Macaulay) duration of the bond. Problem 7: What is the (Macaulay) duration of a bond with the following characteristics: N = 5, PMT = 90, FV = 1000, I/Y = 12%? Problem 8: What is the...

Question

Consider a 12-year bond with face value $1,000 that pays an 8.6% coupon semi-annually and has...

Solutions

Expert Solution

Related Solutions