A 2-year $100 par value bond pays 10% monthly coupons is sold at par. Determine its...

A 2-year $100 par value bond pays 10% monthly coupons is sold at par.

Determine its effective annual rate.

Expert Solution

Value of bond as of today = $100

Value of bond sold after 2 years = $100

Interest Yield in 2 years = 100*10%*2

= $20

Capitial Yield = 0 , Since bond sold at par.

Hence effective annual rate = Interest yield + capital yield

= 20/(2*100) + 0%

= 10%

jeff jeffy answered 1 year ago

A 2-year $100 par value bond pays 10% monthly coupons is sold atpar. Determine its...

A 2-year $100 par value bond pays 10% monthly coupons is sold at par. Determine its effective annual rate

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)...

Consider a 2-year Treasury bond with a face value of $100 and that pays coupons at...

Consider a 2-year Treasury bond with a face value of $100 and that pays coupons at a rate of 6% semiannually. What is the bonds par yield given the following Treasury zero rates? Maturity (years) Zero rates 0.5 3.0% 1.0 3.3% 1.5 3.6% 2.0 3.9% a) 3.89% b)3.99% c)4.19% d)4.39%

A 2-year $100 par value bond pays 5% semi-annual coupons. The 6-month spot rate is 2%,...

A 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%. Determine the price of the bond Determine the yield to maturity of the bond

A company buys a 100 par value bond with 5% annual coupons. The company pays a...

A company buys a 100 par value bond with 5% annual coupons. The company pays a price that will give it a yield rate of 4% effective if the bond matures at par at the end of 7 years. The company receives all coupons when due. However, at the end of 7 years, the company receives a maturity value of only 90, due to the bankruptcy of the issuer of the bond. The company's effective annual yield rate over the...

Bond A pays 8.8 % coupons and is priced at par value. It has 2 years...

Bond A pays 8.8 % coupons and is priced at par value. It has 2 years to maturity. If interest rates suddenly rise by 1.4%, what is the percentage change in price of Bond A? What is the now the price of Bond A?

A 7-year $1000 par value bond with 10% semiannual coupons was sold on April 1, 2000,...

A 7-year $1000 par value bond with 10% semiannual coupons was sold on April 1, 2000, which yields 8% convertible semiannually. The coupons were payable at the beginning of October and April after the purchase. On June 25, 2005, the owner wished to know the dirty and clean values of this bond. Use both theoretical method and practical method, with the “30/360” method for figuring day counts. (Answers: $1055.44, $1032.35 by theoretical method, $1055.64, $1032.31 by practical method). Please show...

A 5.5% bond with 10 years remaining maturity pays coupons quarterly and a $1,000 par value....

A 5.5% bond with 10 years remaining maturity pays coupons quarterly and a $1,000 par value. The yield to maturity on the bond is 4.7%. What is the estimated price change of the bond using duration and convexity if rates rise by 75 basis points?

Hafu buys a 10-year bond with annual coupons. The par value of this bond is 10000...

Hafu buys a 10-year bond with annual coupons. The par value of this bond is 10000 as is the redemption value, and it has an annual coupon rate of 6%. The price Hafu pays for the bond gives it an annual effective yield of 12%. Hafu has set up her investments so that the coupons are immediately deposited in a savings account with an annual effective rate of 9%. What is the annual effective yield (IRR) of Hafu’s overall investment...

There is a bond that pays $100 per year interest, with a $1,000 par value. It...

There is a bond that pays $100 per year interest, with a $1,000 par value. It matures in 15 years. The market required yield to maturity on a comparable bond is 12%. What is the value of the bond? How does the value change if the yield to maturity on a comparable bond increase to 15%? What if it decreases to 8%. Explain the above questions (part b) with the concepts of interest rate risk, premium bonds and discount bonds....

Question