Sarah just used $96.33 purchased a Treasury bond. Assume that the yield rate for this bond...

Sarah just used $96.33 purchased a Treasury bond. Assume that the yield rate for this bond is j₂ =3.91% p.a. and the duration of this bond is 2.61 years. Without actually calculating the new price for this bond, use the bond price and the duration value to estimate (use the price sensitivity formula) the change in price of this bond that would result from an increase in yield rate (j₂) of 18 basis points. Round your answer to four decimal places.

Select one:

a. -0.4355

b. -0.4439

c. -0.2178

d. -0.2219

Expert Solution

Change in price of this bond using durating and yield rate

Yield rate and the price of the bond has inverese relaionship. so increase in yield rate will decrease the bond price.

change in price/price=-duration* Change in yield rate/(1+yield rate)

Duration =2.61 years

Yield rate= 3.91% so 1+yield rate =(1+3.91%)=1.0391

Change in yield rate = 18 basis points = 0.0018

Chane in price =-2.61*0.0018/(1.0391)*96.33$

=--0.4355 is the change in bond price

jeff jeffy answered 2 years ago

Sarah just used $96.23 purchased a Treasury bond. Assume that the yield rate for this bond...

Sarah just used $96.23 purchased a Treasury bond. Assume that the yield rate for this bond is j2 =3.34% p.a. and the duration of this bond is 2.66 years. Without actually calculating the new price for this bond, use the bond price and the duration value to estimate (use the price sensitivity formula) the change in price of this bond that would result from an increase in yield rate (j2) of 16 basis points. Round your answer to four decimal...

You purchased a 12-year Treasury bond with a 7 percent coupon rate. The bond’s asked yield...

You purchased a 12-year Treasury bond with a 7 percent coupon rate. The bond’s asked yield is currently 5.5 percent. The settlement of the purchase occurred 20 days after the last coupon payment and there are 160 days before the next. If the bond has a par value of $1,000 and interest is paid semiannually. What is the full price of the bond that you pay to the seller? $1,130.51 $1,090.21 $1,134.40 $1,121.30 $1,144.12

Yield to Maturity and Current Yield You just purchased a bond that matures in 5 years....

Yield to Maturity and Current Yield You just purchased a bond that matures in 5 years. The bond has a face value of $1,000 and an 8% annual coupon. The bond has a current yield of 8.21%. What is the bond's yield to maturity? Do not round intermediate calculations. Round your answer to two decimal places. The answer is a percentage (%).

Yield to Maturity and Current Yield You just purchased a bond that matures in 12 years....

Yield to Maturity and Current Yield You just purchased a bond that matures in 12 years. The bond has a face value of $1,000 and has an 7% annual coupon. The bond has a current yield of 5.74%. What is the bond's yield to maturity? Round your answer to two decimal places. Constant Growth Valuation Boehm Incorporated is expected to pay a $3.80 per share dividend at the end of this year (i.e., D1 = $3.80). The dividend is expected...

A 30-yr Treasury bond with a coupon yield of 10% and a 5-yr Treasury bond with...

A 30-yr Treasury bond with a coupon yield of 10% and a 5-yr Treasury bond with a coupon yield of 3% have different yields because: A. Inflation is expected to diminish the value of money B. The yield curve is inverted C. Lenders demand compensation for the longer time frame D. The yield curve is flat E. Both A & C

the yield on a 9 month treasury bond 2.3 % the yield on a three year...

the yield on a 9 month treasury bond 2.3 % the yield on a three year treasury bond is 2.9% and the yield on a ten year treasury bond is 4.3%. although no liquidity premium is associated with treasury securities, there is a mrp for treasuries with maturities equal to one year or greater. what is the mrp?

A 5-year Treasury bond has a 3.7% yield. A 10-year Treasury bond yields 7%, and a...

A 5-year Treasury bond has a 3.7% yield. A 10-year Treasury bond yields 7%, and a 10-year corporate bond yields 8.5%. The market expects that inflation will average 3% over the next 10 years (IP10 = 3%). Assume that there is no maturity risk premium (MRP = 0) and that the annual real risk-free rate, r*, will remain constant over the next 10 years. (Hint: Remember that the default risk premium and the liquidity premium are zero for Treasury securities:...

A 5-year Treasury bond has a 4.8% yield. A 10-year Treasury bond yields 6.95%, and a...

A 5-year Treasury bond has a 4.8% yield. A 10-year Treasury bond yields 6.95%, and a 10-year corporate bond yields 9%. The market expects that inflation will average 2.55% over the next 10 years (IP10 = 2.55%). Assume that there is no maturity risk premium (MRP = 0) and that the annual real risk-free rate, r*, will remain constant over the next 10 years. (Hint: Remember that the default risk premium and the liquidity premium are zero for Treasury securities:...

A 5-year Treasury bond has a 4.7% yield. A 10-year Treasury bond yields 6.15%, and a...

A 5-year Treasury bond has a 4.7% yield. A 10-year Treasury bond yields 6.15%, and a 10-year corporate bond yields 8.05%. The market expects that inflation will average 2.25% over the next 10 years (IP10 = 2.25%). Assume that there is no maturity risk premium (MRP = 0) and that the annual real risk-free rate, r*, will remain constant over the next 10 years. (Hint: Remember that the default risk premium and the liquidity premium are zero for Treasury securities:...

Assume a $100,000 par value. What is the yield to maturity of the August 2002 Treasury bond with semiannual payment?

treasury notes and bonds. Use the information in the following table:Assume a $100,000 par value. What is the yield to maturity of the August 2002 Treasury bond with semiannual payment? Compare the yield to maturity and the current yield. How do you explain this relationship? What is the yield to maturity of the August 2002 Treasury bond? Today is February 15, 2008TypeIssue DatePrice (per $100 parvalue)Coupon RateMaturity DateYTM. Current YieldRatingBondAug 200278.033.00%8-15-2012–3.845%AAA

Question