There is a bond with FV = 1000, coupon rate of 10% paid annually
and 5 year maturity. At year 0, YTM = 8%.
Given constant YTM, what is the bond price at time 1?
What is capital gain yield and current yield?
What are the prices of the bond in year 2, 3, 4, and 5?
If at year 1, YTM becomes 12%, what is a bond price in year
1?
Please explain the variables- PV, FV, N, PMT, I/Y, C/Y, and
P/Y.
Can you please write equations that connect these variables?
Can you please write equation for the arithmetic progression
annuity?
You purchase a 3 year bond for $980 (FV=$1000). The bond pays a
5% annual coupon.
What is the current yield of the bond?
If the YTM drops by 0.50% over the next year, what will be your
total return over the next year?
What will be your capital gains/losses on the bond?
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4. Given Pseudocode:
Algorithm3(n):
y = 0
for i = 1 to n do
y = 1
while y < i2 do
y=2y
return y
a. What's the output of Algorithm3(n) as a function of n?
b. What's the running time of Algorithm3(n) as a function of n?
Represent this as a summation.
c. Prove the running time to be O(n log n).
Suppose your firm has the following bond information.
Years to maturity: 10
Coupon Rate: 5%, semi-annual payments
Par Value: $1,000
Price: 112% of par value
Part A & B: Calculate the yield to maturity on the bond and
also calculate the current yield on the bond.
Bond 1 has a 4%annual coupon rate, $1000 maturity value, n = 5
years, YTM = 4% (pays a $40 annual coupon at the end of each year
for each of the 5 years and $1,000 maturity payment at the end of
year 5).
Bond 2 is a zero couponbond with a $1000 maturity value, and n =
5 years; YTM= 4%. (pays no coupons; only a $1,000 maturity payment
at the end of year 5)
a. For the Zero...