Question
In: Finance
Suppose you bought a government bond with face value $1000 with coupon rate 10%. a) If...
Suppose you bought a government bond with face value $1000 with coupon rate 10%.
a) If the bond matures in 2 years, what price should you pay for the bond today to earn a yield of 8%?
b) If the bond matures in 10 years, what price should you pay for the bond today to earn a yield of 10%?
c) For a bond that yields 15% return, what do you expect the price to be relative to the face value? (i.e. higher or lower or equal to face value?)
Solutions
jeff jeffy answered 2 years agoRelated Solutions
Rob decided to by a bond with a face value of 1000, coupon rate of 10%...
Rob decided to by a bond with a face value of 1000, coupon rate
of 10% which is paid out annually, with a maturity of 6 years. Rob
invests the coupon for the first year at 8 percent for a year and
sells the bond after receiving the 2nd years coupon is received. At
time equals 2, the bonds yield to maturity is 9.5 percent. If Rob
earned an annualized 14% return on this what was the purchase price
fo...
Last year, you bought a bond with face value $1000, maturity 20 years, coupon rate of...
Last year, you bought a bond with face value $1000, maturity 20
years, coupon rate of 7% per year payable semi-annually and yield
to maturity of 5.5% per year. Currently the bond sells for $900.
How much would be your total yield if you sell this bond today?
(17.84%) (15.79%) 13.71% 10.78%.
Suppose that you bought a five year coupon bond with $20,000 face value, 7% coupon rate...
Suppose that you bought a five year coupon bond with $20,000
face value, 7% coupon rate and 7% yield to maturity. After holding
it for a year and collecting the first coupon payment you decide to
sell it. Calculate the return (in %) on this investment if the
interest rate has increased to 9% while selling the bond.
You own a bond with the following features: Face value of $1000, Coupon rate...
You own a bond with the following features:
Face value of $1000,
Coupon rate of 5% (annual)
13 years to maturity.
The bond is callable after 7 years with the call price of
$1,071.
If the market interest rate is 3.51% in 7 years when the bond
can be called, if the firm calls the bond, how much will it save or
lose by calling the bond?
State your answer to the nearest penny (e.g., 84.25)
If...
You own a bond with the following features: Face value of $1000, Coupon rate...
You own a bond with the following features:
Face value of $1000,
Coupon rate of 4% (annual)
11 years to maturity.
The bond is callable after 7 years with the call price of
$1,069.
If the market interest rate is 4.23% in 7 years when the bond
can be called, if the firm calls the bond, how much will it save or
lose by calling the bond?
State your answer to the nearest penny (e.g., 84.25)
If...
Suppose a bond with a 10% coupon rate and semiannual coupons, has a face value of...
Suppose a bond with a 10% coupon rate and semiannual coupons,
has a face value of $1000, 20 years to maturity and is selling for
$1197.93.
◦Is the YTM more or less than 10%?
1197.93 = 50[1 – 1/(1+r)40] / r + 1000 / (1+r)40
i know the answer is 4% but how can i calculated the r by
hand?
You bought a 10-year zero-coupon bond with a face value of $1,000 and a yield to...
You bought a 10-year zero-coupon bond with a face value of
$1,000 and a yield to maturity of 2.7% (EAR). You keep the bond for
5 years before selling it.
a:What was the price of the bond when you bought it?
b:What is your personal 5-year rate of return if the yield to
maturity is still 2.7% when you sell the bond? (i.e. what is your
rate of return given what you sold it for at the end of year...
A five-year $1000 face value bond has a 5% coupon rate and a 10% yield to...
A five-year $1000 face value bond has a 5% coupon rate and a
10% yield to maturity. It makes annual coupon payments selling for
$810.46. Please calculate this bond’s (20 points)
Macaulay duration
Modified duration
Convexity
If the interest rate rises by 100 bps, what would be the dollar
amount change in price?
You own a bond with the following features: Face value of $1000, Coupon rate of 6%...
You own a bond with the following features: Face value of $1000,
Coupon rate of 6% (annual) 12 years to maturity. The bond is
callable after 6 years with the call price of $1,070. If the market
interest rate is 4.32% in 6 years when the bond can be called, if
the firm calls the bond, how much will it save or lose by calling
the bond? State your answer to the nearest penny (e.g., 84.25) If
there would be...
You own a bond with the following features: Face value of $1000, Coupon rate of 7%...
You own a bond with the following features: Face value of $1000,
Coupon rate of 7% (annual) 10 years to maturity. The bond is
callable after 6 years with the call price of $1,054. If the market
interest rate is 3.59% in 6 years when the bond can be called, if
the firm calls the bond, how much will it save or lose by calling
the bond? State your answer to the nearest penny (e.g., 84.25) If
there would be...
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