a) What is the price of a 10-year bond paying semi-annual coupons at the rate of...

a) What is the price of a 10-year bond paying semi-annual coupons at the rate of 5% compounded semi- annually, if it is priced to yield 4.8% compounded semi-annually?

b) Is the bond trading at a premium or at a discount?

c) What would be the price quote for this bond?

d) What is the Macaulay duration of this bond in years, rounded to 2 decimal places? (Hint: create a table in excel)

e) What is the price of a 10-year zero coupon bond priced to yield 4.8% compounded semi-annually?

Solutions

Expert Solution

Part (a):

Price of the bond = $101.57 calculated using PV function of Excel as follows:

Part (b):

The bond is trading at premium.

Part (c):

Price quote of the bond=101.57

Part (d):

Macaulay Duration of the bond= 8.01 years as follows:

Part (e):

Zero coupon bond for 10 years. Let the face value (F) be $100.

Compounding frequency= Semi annual . Number of compounding period=20

YTM = 4.8%. Rate per period= 4.8%/2 = 2.4%

Price= $100/(1+2.4%)^20 = $100/ 1.60693804 = $62.23

jeff jeffy answered 1 year ago

Next > < Previous

Related Solutions

A 10 year 1000 bond with 7% semi-annual coupons is bought for a price to yield...

A 10 year 1000 bond with 7% semi-annual coupons is bought for a price to yield 6.5% conv. semiannually. It is bought on Feb 1, 2003. Find the actual selling price on Dec. 31, 2003. Find the price quoted in paper (full) on Dec 31, 2003. Use 30/360.

Problem B, MaGAP Inc issued a Floating Rate Bond, paying semi-annual coupons at the rate of...

Problem B, MaGAP Inc issued a Floating Rate Bond, paying semi-annual coupons at the rate of (ic/2) = [ref rate + 120 BPs]/2. The face value of the bond is $1000 and the current reference rate is 10.8%. The remaining time to maturity is 8 years (16 coupons) and the current market price of the bonds is P = $905.53. Currently, each coupon is expected to pay ($) a. 108 b. 120 c. 60 d. 54 The YTM (based on...

If the semi-annual coupons of a bond are $40, the price of the bond is $1,020,...

If the semi-annual coupons of a bond are $40, the price of the bond is $1,020, and the current yield to maturity is 9%, what is the coupon rate? What is a fair market price for a stock that does not ever pay, nor does anyone believe, it will ever pay a dividend?

1.What is the price of a 20-year bond paying 7 % annual coupons with a face...

1.What is the price of a 20-year bond paying 7 % annual coupons with a face (par) value of $1,000 if an 20-year bond making semi-annual payments and paying 7 % sells at par? Answer to the nearest cent, xxx.xx and enter without the dollar sign. 2.Suppose the interest rate on a 1-year T-bond is 6.3 % and that on a 3 year T-bond is 7.3 %. Assuming the pure expectations theory is correct, what is the market's forecast for...

What is the price of a 12-year bond paying 8.2% annual coupons with a face (par)...

What is the price of a 12-year bond paying 8.2% annual coupons with a face (par) value of $1,000 if the market rates for these bonds are 5.7%? Answer to the nearest cent, xxx.xx What is the price of a zero-coupon 6-year maturity bond per face (par) value of $1,000 if the annual market rates for these bonds are 12.1%? Answer to the nearest cent, xxx.xx

q1. What is the price of a 14-year bond paying 9.1% annual coupons with a face...

q1. What is the price of a 14-year bond paying 9.1% annual coupons with a face (par) value of $1,000 if the market rates for these bonds are 5.5%? Answer to the nearest cent, xxx.xx, and enter without the dollar sign. q2. You are borrowing $200,000 for an amortized loan with terms that include annual payments,6 year loan, and interest rate of 7.2 per year. How much of the first year's payment would be applied toward reducing the principal?

Suppose there is a 15 year bond with at 5.5% coupon rate, paying coupons semi-annually, and...

Suppose there is a 15 year bond with at 5.5% coupon rate, paying coupons semi-annually, and a face value equal to $1000. Suppose the yield to maturity is 6.5%, and the bond is currently selling at $1050. Should you buy the bond? Explain. Suppose you have obtained a $15,000 loan at an APR of 16%, with annual payments. loan term is 5 years Fill out the first year of the amortization schedule for this loan: Year Begin Balance Total Payment Interest...

Suppose there is a 15 year bond with at 5.5% coupon rate, paying coupons semi-annually, and...

Suppose there is a 15 year bond with at 5.5% coupon rate, paying coupons semi-annually, and a face value equal to $1000. Suppose the yield to maturity is 6.5%, and the bond is currently selling at $1050. Should you buy the bond? Explain. Suppose you have obtained a $15,000 loan at an APR of 16%, with annual payments. Fill out the first year of the amortization schedule for this loan: Year Begin Balance Total Payment Interest Paid Principal Paid End Balance...

MT 11)What is the price of a 10-year bond paying an annual coupon rate of 9.8%,...

MT 11)What is the price of a 10-year bond paying an annual coupon rate of 9.8%, but paying it semiannually, per face (par) value of $1,000 if the annual market rates for these bonds are 11%? Answer to the nearest cent, xxx.xx and enter without the dollar sign. 12) You put aside $100,000 in year t = 0, and let it grow at 6.1% interest for 4 years. Exactly one year after that you start to withdraw your money for...

Bond A: 10-year annual bond, price $1010, coupon rate 6% par $1000 bond B: 10-year semi-annual...

Bond A: 10-year annual bond, price $1010, coupon rate 6% par $1000 bond B: 10-year semi-annual bond, price $1010, coupon rate 6%, par $1000 Does bond A has a higher cost of debt than bond B?

Subjects