Question

In: Finance

1. Bond Features Maturity (years) = 9 Face Value = $1,000 Starting Interest Rate 4.89% Coupon...

1.

Bond Features
Maturity (years) =	9
Face Value =	$1,000
Starting Interest Rate	4.89%
Coupon Rate =	3%
Coupon dates (Annual)

If interest rates change from 4.89% to 5.48% immediately after you buy the bond today (and stay at the new interest rate), what is the price effect in year 5 ?

State your answer to the nearest penny (e.g., 48.45)

If there is a loss, state your answer with a negative sign (e.g., -52.30)

2.

Bond Features
Maturity (years) =	7
Face Value =	$1,000
Starting Interest Rate	4.04%
Coupon Rate =	4%
Coupon dates (Annual)

If interest rates change from 4.04% to 6.11% immediately after you buy the bond today (and stay at the new interest rate), what is the price effect in year 4 ?

State your answer to the nearest penny (e.g., 48.45)

If there is a loss, state your answer with a negative sign (e.g., -52.30)

Expert Solution

Q#1: Total term is 9 years. In year 5, remaining term to maturity is 4 years

Price effect in year 5= $48.03

Calculations as below:

Q#2: Total term is 7 years. In year 3, remaining term to maturity is 3 years

Price effect in year 4= -$53.89 (loss)

Calculations as below:

jeff jeffy answered 1 year ago

A. Bond Features Maturity (years) = 7 Face Value = $1,000 Starting Interest Rate 4.28% Coupon...

A. Bond Features Maturity (years) = 7 Face Value = $1,000 Starting Interest Rate 4.28% Coupon Rate = 4% Coupon dates (Annual) If interest rates change from 4.28% to 6.45% immediately after you buy the bond today (and stay at the new interest rate), what is the price effect in year 2 ? State your answer to the nearest penny (e.g., 48.45) If there is a loss, state your answer with a negative sign (e.g., -52.30) B. Assume you buy...

Bond Features Maturity (years) = 6 Face Value = $1,000 Starting Interest Rate 3.83% Coupon Rate...

Bond Features Maturity (years) = 6 Face Value = $1,000 Starting Interest Rate 3.83% Coupon Rate = 4% Coupon dates (Annual) If interest rates change from 3.83% to 6.63% immediately after you buy the bond today (and stay at the new interest rate), what is the price effect in year 4 ? State your answer to the nearest penny (e.g., 48.45) If there is a loss, state your answer with a negative sign (e.g., -52.30)

Bond Features Maturity (years) = 7 Face Value = $1,000 Starting Interest Rate 4.78% Coupon Rate...

Bond Features Maturity (years) = 7 Face Value = $1,000 Starting Interest Rate 4.78% Coupon Rate = 4% Coupon dates (Annual) If interest rates change from 4.78% to 5.02% immediately after you buy the bond today (and stay at the new interest rate), what is the price effect in year 5 ? State your answer to the nearest penny (e.g., 48.45) If there is a loss, state your answer with a negative sign (e.g., -52.30)

Bond Features Maturity (years) = 6 Face Value = $1,000 Starting Interest Rate 3.28% Coupon Rate...

Bond Features Maturity (years) = 6 Face Value = $1,000 Starting Interest Rate 3.28% Coupon Rate = 5% Coupon dates (Annual) If interest rates change from 3.28% to 5.61% immediately after you buy the bond today (and stay at the new interest rate), what is the price effect in year 4 ? State your answer to the nearest penny (e.g., 48.45) If there is a loss, state your answer with a negative sign (e.g., -52.30)

Bond A has the following features: Face value = $1,000, Coupon Rate = 9%, Maturity...

Bond A has the following features: Face value = $1,000, Coupon Rate = 9%, Maturity = 6 years, Yearly coupons The market interest rate is 4.47% If interest rates remain at 4.47%, what is the percentage capital gain or loss on bond A if you sell the bond in year 1? State your answer to 2 decimal places (e.g., 3.56, 0.29) If there is a capital loss make sure to include a negative sign in your answer (e.g.,...

Bond Features Maturity (years) 5 Face Value = $1,000 Coupon Rate = 7.00% Coupon dates (Annual)...

Bond Features Maturity (years) 5 Face Value = $1,000 Coupon Rate = 7.00% Coupon dates (Annual) Market interest rate today 7.00% Time to call (years) 3 Price if Called $1,070.00 Market interest rate in Year 3 5.00% The above bond is callable in 3 years. When the bond is issued today, interest rates are 7.00% . In 3 years, the market interest rate is 5.00% . Should the firm call back the bonds in year 3 and if so, how...

LO3A Bond Features Maturity (years) 5 Face Value = $1,000 Coupon Rate = 3.00% Coupon dates...

LO3A Bond Features Maturity (years) 5 Face Value = $1,000 Coupon Rate = 3.00% Coupon dates (Annual) Market interest rate today 3.00% Time to call (years) 3 Price if Called $1,030.00 Market interest rate in Year 3 1.00% The above bond is callable in 3 years. When the bond is issued today, interest rates are 3.00% . In 3 years, the market interest rate is 1.00% . Should the firm call back the bonds in year 3 and if so,...

Bond A has the following features: Face value = $1,000, Coupon Rate = 5%, Maturity...

Bond A has the following features: Face value = $1,000, Coupon Rate = 5%, Maturity = 9 years, Yearly coupons The market interest rate is 6.15% What is the current yield for bond A from today to year 1? Calculate your answer to 2 decimal places (e.g., 5.23)

A. Bond A has the following features: Face value = $1,000, Coupon Rate = 4%, Maturity...

A. Bond A has the following features: Face value = $1,000, Coupon Rate = 4%, Maturity = 6 years, Yearly coupons The market interest rate is 4.05% If interest rates remain at 4.05%, what will the price of bond A be in year 1? B.Bond B has the following features: Face value = $1,000, Coupon Rate = 4%, Maturity = 4 years, Yearly coupons The market interest rate is 5.04% If interest rates remain at 5.04%, what is...

Bond Features Maturity (years) = 5 Face Value = $1,000 YTM = 4.00% Dollar Coupon $70...

Bond Features Maturity (years) = 5 Face Value = $1,000 YTM = 4.00% Dollar Coupon $70 Coupon dates (Annual) What is the Coupon Rate on the above bond ? Group of answer choices 4.00% 6.16% 7.00% 6.18% 6.24%