Question

In: Finance

Question 1- A 3-year bond carrying 3.4% annual coupon and $100-par is putable at par 1...

Question 1-

A 3-year bond carrying 3.4% annual coupon and $100-par is putable at par 1 year and 2 years from today. Calculate the value of the putable bond under the forward rate curve below.

1-year spot rate: 2.0%;

1-year spot rate 1 year from now: 2.6%;

1-year spot rate 2 years from now: 4.1%.

Assume annual compounding. Round your answer to 2 decimal places (nearest cent).

Question 2-

A 3-year bond carrying 3.4% annual coupon and $9,000-par is putable at par 1 year and 2 years from today. Calculate the value of the underlying straight bond under the forward rate curve below.

1-year spot rate: 2.1%;

1-year spot rate 1 year from now: 2.7%;

1-year spot rate 2 years from now: 4.2%.

Assume annual compounding. Round your answer to 2 decimal places (nearest cent).

Solutions

Expert Solution

jeff jeffy answered 2 years ago
Next > < Previous

Related Solutions

A 3-year bond carrying 3.4% annual coupon and $100-par is putable at par 1 year and...
A 3-year bond carrying 3.4% annual coupon and $100-par is putable at par 1 year and 2 years from today. Calculate the value of the putable bond under the forward rate curve below. 1-year spot rate: 2.1%; 1-year spot rate 1 year from now: 2.5%; 1-year spot rate 2 years from now: 3.8%. Assume annual compounding. Round your answer to 2 decimal places (nearest cent).
A 3-year bond carrying 3.5% annual coupon and $100-par is putable at par 1 year and...
A 3-year bond carrying 3.5% annual coupon and $100-par is putable at par 1 year and 2 years from today. Calculate the value of the putable bond under the forward rate curve below. 1-year spot rate: 1.6%; 1-year spot rate 1 year from now: 2.8%; 1-year spot rate 2 years from now: 4.3%. Assume annual compounding. Round your answer to 2 decimal places (nearest cent).
Consider the same 3 year bond with a $100 par value and a 5% annual coupon...
Consider the same 3 year bond with a $100 par value and a 5% annual coupon where comparable bonds are yielding 6% (assume continuous compounding). If the yield goes up 1%, then according to the duration formula for a bond's price change, the bond price will change by: (Present decreases as negative values, increases as positive values)
For a 3 year annual bond, currently priced at $78, par value $100, with coupon rate...
For a 3 year annual bond, currently priced at $78, par value $100, with coupon rate 3%. tax rate by 30%. How much is the cost of debt after tax? Remember to keep at least 4 decimals.
KFA has issued a 100-year coupon bond with par of $1,000, and a 6.50% annual coupon...
KFA has issued a 100-year coupon bond with par of $1,000, and a 6.50% annual coupon paid semi-annually. Calculate its price for each of the following three YTM scenarios: 4.0%, 6.0%, and 8.0%.
KFA has issued a 100-year coupon bond with par of $1,000, and a 6.50% annual coupon...
KFA has issued a 100-year coupon bond with par of $1,000, and a 6.50% annual coupon paid semi-annually. Calculate its price for each of the following three YTM scenarios: 4.0%, 6.0%, and 8.0%. Input: Output: Par ($)        1,000.00 Years to maturity                100 Annual coupon rate 6.50% Coupons per year                    2 Price Yield to maturity 4.0% Yield to maturity 6.0% Yield to maturity 8.0% KFA is evaluating a project with the following cash flows in the first 4...
9. Bond T is a 3 year, 8% annual coupon bond with a par value of...
9. Bond T is a 3 year, 8% annual coupon bond with a par value of $1000 and current value of $1000. The discount rate is equal to the coupon rate. What is the duration of Bond T? 10. Using the information in #9 and considering an expected rise of interest rates by 1%, calculate the modified duration for Bond T. 13. Daniels Company’s preferred stock is expected to pay a $1.25 dividend at the end of each year. The...
1.An investor buys a 9-year, 6.9% annual coupon bond at par ($100). After the purchase and...
1.An investor buys a 9-year, 6.9% annual coupon bond at par ($100). After the purchase and before the first coupon is received, interest rates increase to 8.9% (assume a flat spot rate curve). The investor sells the bond after 7 years (right after receiving the 7th coupon payment). What is this investor's realized annual return in these 7 years? Assume annual compounding, and that interest rates remain at 8.9% over the entire holding period. 2.An investor with an investment horizon...
you own a 15 - year 100 par bond. The coupon rate is an annual 9%...
you own a 15 - year 100 par bond. The coupon rate is an annual 9% payable annually. The price of the bond is 95.50 D. Calculate the approximate change in price of the bond if the yield rate increas by 0.5% using First Order Macaulay Approximation E. Calculate the approximate change in price of the bond if the yield rate increase by 0.5% using First Order Modified Approximation F. Calculate the exact change in price of the bond
A 3-year $100 par value bond pays 9% annual coupons. The spotrate of year 1...
A 3-year $100 par value bond pays 9% annual coupons. The spot rate of year 1 is 6%, the 2- year spot rate is 12%, and the 3-year spot rate is 13%.a) Determine the price of the bondb) Determine the yield to maturity of the bondA 2-year $100 par value bond pays 5% semi-annual coupons. The 6-month spot rate is 2%, the 1-year spot rate is 2.5%, the 18-month spot rate is 3% and the 2-year spot rate is 4%.c)...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT