Question
In: Finance
For a 5-year 9% coupon bond trading at 8% (making semi-annual coupon payments), calculate its 1)...
For a 5-year 9% coupon bond trading at 8% (making semi-annual coupon payments), calculate its 1) approximate duration and 2) approximate convexity given a 10 bps change in the bond’s yield to maturity.
Solutions
jeff jeffy answered 1 year agoRelated Solutions
1.) A 9 year, 8% semi annual bond is selling for $1052.32. Calculate the bonds YTM....
1.)
A 9 year, 8% semi annual bond is selling for $1052.32. Calculate
the bonds YTM.
2.) Assume that same bond is callable in 4 years with a call
premium of $70. Calculate the bonds YTC.
3.) Say you buy the bond for $1052.32, but you plan to hold it
for 3 years only. Using the term structure on interest rates, you
estimate the YTM on the bond when you sell it to be 6.84%.
Calculate what you expect your...
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A 100-year corporate bond has a coupon rate of
9% with semi-annual payments. If the current value
of the bond in the marketplace is $400, then what is the
Yield-to-Maturity (YTM)?
A 100-year corporate bond has a coupon rate of 9% with semi-annual payments. If the current...
A 100-year corporate bond has a coupon rate of
9% with semi-annual payments. If the current value
of the bond in the marketplace is $400, then what is the
Yield-to-Maturity (YTM)?
A 27-year maturity bond making annual coupon payments with a coupon rate of 9% has duration...
A 27-year maturity bond making annual coupon payments with a
coupon rate of 9% has duration of 11.5 years and convexity of
191.2. The bond currently sells at a yield to maturity of 8%.
Required:
(a)
Find the price of the bond if its yield to maturity falls to 7%
or rises to 9%. (Round your answers to 2 decimal places.
Omit the "$" sign in your response.)
Yield to maturity of 7%
$
Yield to maturity of 9%
$ ...
A 10-Year maturity bond making annual coupon payments with a coupon rate of 5% and currently...
A 10-Year maturity bond making annual coupon payments with a
coupon rate of 5% and currently selling at a yield to maturity of
4% has a convexity of 145.4.
Compute the modified duration of the bond.
Based on the information above, compute the approximated new
price using the Duration & Convexity adjustment if the yield to
maturity increases by 75 basis points.
What is the percentage error?
A 30-year maturity bond making annual coupon payments with a coupon rate of 8% has duration...
A 30-year maturity bond making annual coupon payments with a
coupon rate of 8% has duration of 11.37 years and convexity of
187.81. The bond currently sells at a yield to maturity of 9%.
a. Find the price of the bond if its yield to
maturity falls to 8%. (Do not round intermediate
calculations. Round your answers to 2 decimal places.)
b. What price would be predicted by the
duration rule? (Do not round intermediate calculations.
Round your answers to...
What is the duration of a 5 year, 8% semi-annual coupon bond with a face value...
What is the duration of a 5 year, 8% semi-annual coupon bond
with a face value of $1,000 that is currently selling at a YTM of
10%?
Find the duration of a 8% coupon bond making annual coupon payments if it has three...
Find the duration of a 8% coupon bond making annual
coupon payments if it has three years until maturity and a yield to
maturity of 7%.
Find the bond price.
If the market interest rates decrease by .5% per year (i.e. YTM
becomes 6.5%). Use duration formula to find how such interest rate
change will affect the bond price?
Find the new bond price using a financial calculator.
Compare actual and duration predicted bond price changes.
Which change is larger?...
Find the duration of a 8% coupon bond making annual coupon payments if it has 3...
Find the duration of a 8% coupon bond making annual coupon
payments if it has 3 years until maturity and has a yield to
maturity of 10%. Note: The face value of the bond is $1,000. (Do
not round intermediate calculations. Round your answers to 3
decimal places.) 10% YTM: Duration = ________ years
Bond X is a premium bond making annual payments. The bond pays an 8 percent coupon,...
Bond X is a premium bond making annual payments. The bond pays
an 8 percent coupon, has a YTM of 6 percent, and has 13 years to
maturity. Bond Y is a discount bond making annual payments. This
bond pays a 6 percent coupon, has a YTM of 8 percent, and also has
13 years to maturity. If interest rates remain unchanged, what do
you expect the price of these bonds to be one year from now? In
three years?...
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