Question
In: Finance
Mr. James has two coupon bonds with different maturities. Bond A has 10 years of maturity,...
Mr. James has two coupon bonds with different maturities. Bond A has 10 years of maturity, while bond B has 30 years of maturity. Both the bonds have 10% coupon rates paid annually and a par value of $100. If the yield to maturity changes from 5% to 6%, what is the percentage change in the price of each bond?
Solutions
jeff jeffy answered 1 year agoRelated Solutions
Mr. James has two coupon bonds with different maturities. Bond A has 10 years of maturity,...
Mr. James has two coupon bonds with different maturities. Bond
A has 10 years of maturity, while bond B has 30 years of maturity.
Both the bonds have 10% coupon rates paid annually and a par value
of $100. If the yield to maturity changes from 5% to 6%, what is
the percentage change in the price of each bond?
Below is a list of prices for zero-coupon bonds of various maturities. Maturity (Years) Price of...
Below is a list of prices for zero-coupon bonds of various
maturities.
Maturity (Years)
Price of $1,000 Par Bond
(Zero-Coupon)
1
$
978.14
2
893.66
3
807.34
a. A 9.7% coupon $1,000 par bond pays an annual
coupon and will mature in 3 years. What should the yield to
maturity on the bond be?
b. If at the end of the first year the yield
curve flattens out at 8.0%, what will be the 1-year holding-period
return on the coupon...
Below is a list of prices for zero-coupon bonds of various maturities. Maturity (Years) Price of...
Below is a list of prices for zero-coupon bonds of various
maturities.
Maturity (Years)
Price of $1,000 Par Bond
(Zero-Coupon)
1
$
945.80
2
877.23
3
803.34
a. A 4.8% coupon $1,000 par bond pays an annual
coupon and will mature in 3 years. What should the yield to
maturity on the bond be? (Round your answer to 2 decimal
places.)
b. If at the end of the first year the yield
curve flattens out at 8.4%, what will be...
Consider two bonds. The first is a 6% coupon bond with six years to maturity, and...
Consider two bonds. The first is a 6% coupon bond with six years
to maturity, and a yield to maturity of 4.5% annual rate,
compounded semi-annually. The second bond is a 2% coupon bond with
six years to maturity and a yield to maturity of 5.0%, annual rate,
compounded semi-annually. a. Draw a cash flow diagram for each
bond. b. Calculate the current price per $100 of face value for
each bond.
Consider two bonds. The first is a 6% coupon bond with six years to maturity, and...
Consider two bonds. The first is a 6% coupon bond with six years
to maturity, and a yield to maturity of 4.5% annual rate,
compounded semi-annually. The second bond is a 2% coupon bond with
six years to maturity and a yield to maturity of 5.0%, annual rate,
compounded semi-annually.
1. Calculate the current price per $100 of face value of each
bond. (You may use financial calculator to do question 1 and 2, I'm
just unsure how to use...
Consider Bond C – a 4% coupon bond that has 10 years to maturity. It makes...
Consider Bond C – a 4% coupon bond that has 10 years to
maturity. It makes semi-annual payments and has a YTM of 7%. If
interest rates suddenly drop by 2%, what is the percentage change
of the bond? What does this problem tell you about the relationship
between interest rate and bond price? Consider another bond – Bond
D, which is a 10% coupon bond. Similar to Bond C, it has 10 years
to maturity. It also makes semi-annual...
8. a) Consider Bond C – a 4% coupon bond that has 10 years to maturity....
8. a) Consider Bond C – a 4% coupon bond that has 10 years to
maturity. It makes semi-annual payments and has a YTM of 7%. If
interest rates suddenly drop by 2%, what is the percentage change
of the bond? What does this problem tell you about the relationship
between interest rate and bond price?
b) Consider another bond – Bond D, which is a 10% coupon bond.
Similar to Bond C, it has 10 years to maturity. It...
We have two $1,000 bonds in a portfolio. Bond 1 has a maturity of 10 years,...
We have two $1,000 bonds in a portfolio.
Bond 1 has a maturity of 10 years, coupon rate of 7%,
semiannual interest
Bond 2 has a maturity of 8 years and a coupon rate of 11%,
semiannual interest
Assume that bond yields of all maturities (ytm) are 6%
a. what are the prices(value) of the bonds
b. If bond yields drop to 5%, what will happen to the bond
prices
Bond X is noncallable and has 20 years to maturity, a 10% annual coupon, and a...
Bond X is noncallable and has 20 years to maturity, a 10% annual
coupon, and a $1,000 par value. Your required return on Bond X is
11%; if you buy it, you plan to hold it for 5 years. You (and the
market) have expectations that in 5 years, the yield to maturity on
a 15-year bond with similar risk will be 8.5%. How much should you
be willing to pay for Bond X today? (Hint: You will need to...
Bond X is noncallable and has 20 years to maturity, a 10% annual coupon, and a...
Bond X is noncallable and has 20 years to maturity, a 10% annual
coupon, and a $1,000 par value. Your required return on Bond X is
12%; if you buy it, you plan to hold it for 5 years. You (and the
market) have expectations that in 5 years, the yield to maturity on
a 15-year bond with similar risk will be 10%. How much should you
be willing to pay for Bond X today? (Hint: You will need to...
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