Consider a 10% annual coupon bond with three years of remaining maturity and a current YTM...

Consider a 10% annual coupon bond with three years of remaining maturity and a current YTM of 12%. Calculate the duration and convex it’s of this bond. If rates are expected to decline 2 percentage points use the convexity approximation to estimate the percentage change be in price for the bond.

Expert Solution

In the Convexity Formula:

C is the Convexity

is the change in interest rate

jeff jeffy answered 2 years ago

Consider a 5- year bond with a semi-annual 10% coupon and a yield to maturity(ytm) of...

Consider a 5- year bond with a semi-annual 10% coupon and a yield to maturity(ytm) of 9.00%. what is the duration of this bond in years?

a) Consider Bond C – a 4% coupon bond that has 10 years to maturity. It makes semi-annual payments and has a YTM of 7%

a) Consider Bond C – a 4% coupon bond that has 10 years to maturity. It makes semi-annual payments and has a YTM of 7%. If interest rates suddenly drop by 2%, what is the percentage change of the bond? What does this problem tell you about the relationship between interest rate and bond price? b) Consider another bond – Bond D, which is a 10% coupon bond. Similar to Bond C, it has 10 years to maturity. It...

1 Calculate the Yield to Maturity (YTM) of a 10-year annual coupon-ed bond with a coupon...

1 Calculate the Yield to Maturity (YTM) of a 10-year annual coupon-ed bond with a coupon rate of 7%, a price of $1050, and a face value of $1000. 2 a Calculate the Yield to Maturity (YTM) of a 10-year semiannual coupon-ed bond with a coupon rate of 7%, a price of $1050, and a face value of $1000. b Calculate this bond's Current Yield (CY). 3 In previous Questions 4 and 5, with all the same maturity, coupon...

Bond 1 has a 10% annual coupon rate, $1000 maturity value, n = 5 years, YTM...

Bond 1 has a 10% annual coupon rate, $1000 maturity value, n = 5 years, YTM = 10% (pays a $100 annual coupon at the end of each year and $1,000 maturity payment at maturity at the end of year 5). Bond 2 is a zero coupon bond with a $1000 maturity value, and n = 5years; YTM= 10%. (has no coupon payments; only a $1,000 maturity payment paid at maturity at the end of year 5). What is the...

Consider a 3-year maturity annual 9% coupon paying bond with a YTM of 12%. a. What...

Consider a 3-year maturity annual 9% coupon paying bond with a YTM of 12%. a. What is the Duration of this bond? b. What will be the predicted price of this bond if the market yield increases by 100 basis points. [Remember, 100 basis points = 1% point]? You must use the duration (calculated in the part above) to get full points for this question.

Peter purchased a 10-year corporate bond with an 8% annual coupon and the yield-to-maturity (YTM) was...

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.]...

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

A 4% annual coupon bond has 5 years remaining until maturity and is priced to yield...

A 4% annual coupon bond has 5 years remaining until maturity and is priced to yield 6%. (a) What is the price per 100 of par? (b) For this bond, estimate the price value of a basis point by first considering an increase in yield and then a decrease in yield. (c) Now show that for very small price changes, the absolute value of a bond’s price change does not differ much conditional on whether the yield change is a...

A 4% annual coupon corporate bond with two years remaining to maturity has a Z-spread of...

A 4% annual coupon corporate bond with two years remaining to maturity has a Z-spread of 200 bps. The two-year, 2% annual payment government benchmark bond is trading at a price of 98.106. The one-year and two-year government spot rates are 2% and 3%, respectively, stated as effective annual rates.Assume all interest paid annually. (a)Calculate the corporate bond price. (b)Calculate the G-spread, the spread between the yields-to-maturity on the corporate bond and the government bond having the same maturity.

T-Bond Face Value $20,000 Coupon Rate 4.50% Current YTM 3.00% Remaining Term on T-Bond in years...

T-Bond Face Value $20,000 Coupon Rate 4.50% Current YTM 3.00% Remaining Term on T-Bond in years 22 Annual Investment in stock fund $2,750.00 Annual Return on Stock Fund 6.25% Jenna's current age 22 Desired retirement age 63 Planned life expectancy ( age in years) 96 Jenna's expected annual salary increases for Q7 3.25% Inflation Rate for Q7 2.75% Current Coca-Cola Stock Price for Q9 53.48 Coca-Cola Annual Dividend (just paid) $1.60 Cocal-Cola Expected Dividend Growth 4% Suppose Jenna’s Treasury bond...

Question