Question
In: Finance
Consider the following information about zero coupon bonds. Each spot rate is expressed as an annual...
Consider the following information about zero coupon bonds. Each spot rate is expressed as an annual percentage rate (APR), compounded semi-annually.
| Bond | Maturity | Price | Face Value | Spot Rate(APR) |
| a | 1 year | ? | $1000 |
9.66% |
| b | 2 year | $856 | $1000 | ? |
a) Calculate the price of bond A and the annual spot rate (APR) of bond B
b) Calculate the price of a two-year level coupon bond (bond C) with an annual 5% coupon rate (annual payments)
Solutions
jeff jeffy answered 2 years agoRelated Solutions
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Consider the following spot rates.Maturity (years)Zero rate (%)132434.645What is the one-year forward rate for year two?
The following table summarizes prices of various default-free zero-coupon bonds (expressed as a percentage of the...
The following table summarizes prices of various default-free
zero-coupon bonds (expressed as a percentage of the face value):
Maturity (years) 1 2 3 4 5 Price (per $100 face value)
$95.3295.32 $90.9690.96 $86.2886.28 $81.4381.43 $76.2976.29 a.
Compute the yield to maturity for each bond. b. Plot the
zero-coupon yield curve (for the first five years). c. Is the
yield curve upward sloping, downward sloping, or flat?
The following table summarizes prices of various default-free zero-coupon bonds (expressed as a percentage of the...
The following table summarizes prices of various default-free
zero-coupon bonds (expressed as a percentage of the face
value):
Maturity (years) 1 2 3 4 5
Price (per $100 face value) $95.06, $90.74, $86.20, $81.41,
$76.40
a. Compute the yield to maturity for each bond.
b. Plot the zero-coupon yield curve (for the first five
years).
c. Is the yield curve upward sloping, downward sloping, or
flat?
Suppose that the spot interest rate on a one-year zero-coupon bond is 2% and the spot...
Suppose that the spot interest rate on a one-year zero-coupon
bond is 2% and the spot interest rate on a two-year zero-coupon
bond is 3.5%. Based on the pure expectations theory of the term
structure of interest rates, what is the expected one-year interest
rate starting in one year?
Suppose that the spot interest rate on a one-year zero-coupon bond is 1%, and the spot...
Suppose that the spot interest rate on a one-year zero-coupon
bond is 1%, and the spot interest rate on a two-year zero-coupon
bond is 2%. Suppose also that you expect the one-year interest rate
starting in one year to be 1%. Relative to the market expectations,
do you think a recession is more likely or less likely?
The following table summarizes prices of various default-free zero-coupon bonds (expressed as a percentage of face...
The following table summarizes prices of various default-free
zero-coupon bonds (expressed as a percentage of face value):
Maturity (years)
1
2
3
4
5
Price (per $100 face value)
94.52
89.68
85.40
81.65
78.35
The yield to maturity for the five-year zero-coupon bond is
closest to:
A. 5.0%
B. 5.8%
C. 5.4%
D. 5.6%
E. 6.0%
Consider the following two bonds. One bond with a coupon rate of 6%, semi-annual coupons, and...
Consider the following two bonds. One bond with a coupon rate of
6%, semi-annual coupons, and 20 years until maturity. The second
bond has 10 years until maturity but is otherwise the same. a. What
is the most you should pay for each asset if current yields are 7%?
b. Do the bonds sell at a premium or a discount? c. Suppose current
yields increase to 8%, what are the new bond prices? d. Which bond
is more sensitive to...
#5) At maturity, each of the following zero coupon bonds (pure discount bonds) will be worth...
#5) At maturity, each of the following zero coupon bonds (pure
discount bonds) will be worth $1,000. For each bond, fill in the
missing quantity in the following table. Assume semi-annual
compounding. (Round present value factor calculations
to 5 decimal places, e.g. 1.25124 and final answers to 2 decimal
places, e.g. 15.25 or 15.25%.)
Price
Maturity (years)
Yield to maturity
A
$441
10
???
%
B
$409
???
5
%
C
???
15
13
%
At maturity, each of the following zero coupon bonds (pure discount bonds) will be worth $1,000....
At maturity, each of the following zero coupon bonds (pure
discount bonds) will be worth $1,000. For each bond, fill in the
missing quantity in the following table. Assume semi-annual
compounding. (Round present value factor calculations
to 5 decimal places, e.g. 1.25124 and final answers to 2 decimal
places, e.g. 15.25 or 15.25%.)
Price
Maturity (years)
Yield to maturity
A
$445
8
???
%
B
$405
???
7
%
C
???
15
11
%
Suppose the spot rate for U.S. expressed in C$ is C$1.20 and the expected annual inflation...
Suppose the spot rate for U.S. expressed in C$ is C$1.20 and the
expected annual inflation rate in Canada is 2.5% and that in the
United States 2%. Using PPP forecasting model, calculate
one-year forecast for the U.S. dollar. Will the dollar
appreciate or depreciate? By what percentage?
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