Question

In: Finance

17. You have a 2% bond paying annual coupons, 3 years until maturity with $1000 face...

17. You have a 2% bond paying annual coupons, 3 years until maturity with $1000 face value. Yield to maturity is 2.5%. What is the duration of the bond? Show all calculations.

18. Suppose there is another bond which pays annual coupons of 5% and has 3 years to maturity with a $1000 face value. Yield to maturity is 2.5%. Is the duration of this bond higher or lower than the bond in question 17?

Solutions

Expert Solution

Please refer to below spreadsheet for calculation and answer. Cell reference also provided.

Cell reference -

jeff jeffy answered 16 hours ago
Next > < Previous

Related Solutions

A bond with exactly five years until maturity paying 3% p.a. coupons semi-annually and with a...
A bond with exactly five years until maturity paying 3% p.a. coupons semi-annually and with a face value of $100 was purchased at a yield of 3.5% p.a. The bond was sold exactly two years later for a yield of 2% p.a. All coupons were reinvested at 3% p.a. Calculate the realised yield-to-maturity on this bond.
1. You have a zero coupon bond with ten years until maturity with $1000 face value....
1. You have a zero coupon bond with ten years until maturity with $1000 face value. Yield to maturity is 5%. What is the duration of the bond? Show all calculations. 2. You have a 2% bond paying annual coupons, 3 years until maturity with $1000 face value. Yield to maturity is 2.5%. What is the duration of the bond? Show all calculations.
Suppose that a bond has the following terms: •10-years-to-maturity •$1000 face value •Semi-annual coupons, with an...
Suppose that a bond has the following terms: •10-years-to-maturity •$1000 face value •Semi-annual coupons, with an annual coupon rate of 5% Suppose that all discount rates are 7%. 1. Calculate the price of the bond. 2. Calculate the bond’s modified duration. 3. Calculate the bond’s convexity. 4. If discount rates increase to 10%, what is the new price of the bond. Do (i) the actual calculation and (ii) approximate the new bond price using the duration and convexity. How well...
A bond with exactly five years until maturity paying 6% p.a. coupons semi-annually and with a...
A bond with exactly five years until maturity paying 6% p.a. coupons semi-annually and with a face value of $100 was purchased at a yield of 6.5% p.a. The bond was sold exactly two years later for a yield of 5% p.a. All coupons were reinvested at 6% p.a. Calculate the realised yield-to-maturity on this bond.A bond with exactly five years until maturity paying 6% p.a. coupons semi-annually and with a face value of $100 was purchased at a yield...
Question 3: A bond with a face value of $1000 and maturity of exactly 5 years...
Question 3: A bond with a face value of $1000 and maturity of exactly 5 years pays 10% annual coupon. This bond is currently selling at an annual yield-to-maturity (YTM) of 11.5%. Answer the following questions for this bond. Calculate the current price of the bond. (5 points) Calculate modified duration of the bond using the timeline method. (10 points) Using just the modified duration, what is the new price of the bond when YTM is 12%? (5 points) solve...
Consider a $1,000.00 face value bond with a $55 annual coupon and 10 years until maturity....
Consider a $1,000.00 face value bond with a $55 annual coupon and 10 years until maturity. Calculate the current yield; the coupon rate and the yield to maturity under each of the following: a) The bond is purchased for $940.00 b) The bond is purchased for $1,130.00 c) The bond is purchased for $1,000.00
Bond A and bond B both pay annual coupons, mature in 8 years, have a face...
Bond A and bond B both pay annual coupons, mature in 8 years, have a face value of $1000, pay their next coupon in 12 months, and have the same yield-to-maturity. Bond A has a coupon rate of 6.5 percent and is priced at $1,056.78. Bond B has a coupon rate of 7.4 percent. What is the price of bond B? a. $1,113.56 (plus or minus $4) b. $1,001.91 (plus or minus $4) c. $1,056.78 (plus or minus $4) d....
Bond A and bond B both pay annual coupons, mature in 8 years, have a face...
Bond A and bond B both pay annual coupons, mature in 8 years, have a face value of $1000, pay their next coupon in 12 months, and have the same yield-to-maturity. Bond A has a coupon rate of 6.5 percent and is priced at $1,050.27. Bond B has a coupon rate of 7.4 percent. What is the price of bond B?
A 6% annual coupon bond has 11 years remaining until maturity. Par value is $1000. The...
A 6% annual coupon bond has 11 years remaining until maturity. Par value is $1000. The required rate of return (yield to maturity)on the bond is 8.5%. Compute the price of the bond today using the appropriate Excel formula Compute the price of the same bond if it has 10 years remaining to maturity instead of 11. What is the capital gains yield on the bond? What is the current yield on the bond? What is the total yield on...
An investor buys 6% semi-annual coupon paying bond with six years to maturity and $1000 par...
An investor buys 6% semi-annual coupon paying bond with six years to maturity and $1000 par value at $906.15.The bond has a YTM of 8%. For all the calculations ,keep four digits after the decimal place b)Calculate the bond's modified duration c)If the interest rate increases by 20 basis points, what is the approximate value of the bond by using modified duration? d)What is the real value of the bond after the change (using the bond pricing formula )?
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT