6. Consider a bond with semi-annual coupon payments of $50, a principal payment of $1,000 in...

6. Consider a bond with semi-annual coupon payments of $50, a principal payment of $1,000 in 5 years, and a price of $1,000. Assume that the yield curve is a flat 10%. What is the duration of the bond?

Expert Solution

Bonds are financial instruments that provide fixed returns to its holders. Bonds actually have a nature of debt with a fixed interest rate and a maturity, also known as Plain Vanilla Bond. Some bonds have a callability feature which enables the issuer to call and buy back the bonds from the existing bondholders.

Given the Semi-annual coupon amount, calculate the Semi-annual Coupon Rate:

Thus, the annual Coupon Rate is 0.05*2 = 0.1 or 10%

Bond duration is the measure of the responsiveness of the bond price with respect to movements in interest rates.

It can be calculated using the Duration Function in MS – Excel:

Thus, the duration of the bond is 4.05 years.

jeff jeffy answered 2 years ago

A bond with a par value of $1,000 has a 6% coupon rate with semi-annual coupon...

A bond with a par value of $1,000 has a 6% coupon rate with semi-annual coupon payments made on July 1 and January 1. If the bond changes hands on November 1, which of the following is true with respect to accrued interest? The buyer will pay the seller $20 of accrued interest The seller will pay the buyer $20 of accrued interest The buyer will pay the seller $10 of accrued interest The seller will pay the buyer $10...

A bond with face Value =$1,000 with semi-annual payments, a coupon rate of 7%, and has...

A bond with face Value =$1,000 with semi-annual payments, a coupon rate of 7%, and has 8 years to maturity. The market requires a yield of 8% on bonds of this risk. What is this bond’s price?

What is the yield to maturing for a 6% coupon bond, with semi-annual payments, with 15...

What is the yield to maturing for a 6% coupon bond, with semi-annual payments, with 15 years remaining to maturity and selling at a price of $912.36?

A 10-year, 10% coupon bond, semi-annual payments, $1,000 Par, is expected to make all coupon payments...

A 10-year, 10% coupon bond, semi-annual payments, $1,000 Par, is expected to make all coupon payments but to pay only 50% of par value at maturity. What is the expected yield on this bond if the bond is purchased for $975? a. 10.00% b. 6.77% c. None of the options are correct. d. 11.68% e. 6.68%

A bond with a face value of $1000 will pay it's next semi-annual $50 coupon payment...

A bond with a face value of $1000 will pay it's next semi-annual $50 coupon payment in exactly 6-months. What is the price of the bond if it matures in 6 years and the required yield-to-maturity is 14% APR compounded semi-annually?

1. You hold a 6% coupon bond of $100MM with semi-annual payments and exactly four payments...

1. You hold a 6% coupon bond of $100MM with semi-annual payments and exactly four payments remaining to maturity. a.) Show the four future cash flows b.) Calculate the value of the bond if the yield curve is currently flat at 3.5% p.a. and c.) Calculate the duration and volatility of the bond. 2. Your bank has offered you a 5 year loan at 8.4% p.a. to refinance your car. a.)What would your monthly installments be on a $19,000 loan?...

A bond that makes annual payments is initially selling at $1,000. It has a 6% coupon...

A bond that makes annual payments is initially selling at $1,000. It has a 6% coupon rate and 6% YTM. The maturity is 10 years and face value is $1,000. If the YTM falls to 5%, what is the percentage change in the price? Enter as a whole percentage to two decimals with no symbols (e.g if the change is 9.52% enter 9.52). Numeric Response

3. (8 marks) Consider a 6-year, $1,000 par bond that pays semi-annual coupon. Its yield to...

3. Consider a 6-year, $1,000 par bond that pays semi-annual coupon. Its yield to maturity is 7% and is selling for $1,095.452? Find the coupon rate of this bond.

The Fresno Eastern Company (FEC) bond carries a coupon rate of 6% with semi-annual payments, a...

The Fresno Eastern Company (FEC) bond carries a coupon rate of 6% with semi-annual payments, a $1,000 par, and a maturity of 20 years. The current price of the bonds is $990. The firm’s average tax rate is 21%. What is its after-tax cost of bonds (debts)? Round the answers to 4 decimal places, e.g., 0.3216. Treasury bond currently yields 1.80% and the expected market return is 8%. FEC’s beta is 0.98. Please use the CAPM model to calculate FEC’s...

A five year bond, face value of 1,000 with a 6% semi-annual coupon is yielding 5.6%....

A five year bond, face value of 1,000 with a 6% semi-annual coupon is yielding 5.6%. It amortizes by paying 10% at the end of each year. Produce a table of cash flows for each payment date, showing coupon and principal separately. III The thirty-year US Treasury bond has a 2.5% coupon and yields 3.3%. What is its price? A thirty-year corporate bond with a 4% coupon is priced at par. Is it possible for the corporate bond to have...

Question