Question
In: Economics
Consider two Bonds: 1) a zero-coupon bond with face value F maturing in 1 year; 2)...
Consider two Bonds: 1) a zero-coupon bond with face value F maturing in 1 year; 2) a coupon bond with face value F maturing in 4 years, i.e., T = 4, with coupon of $12 paid annually. Suppose that the continuous compounding is at the rate of r = 10%. (4a). If the price of bond 2 is equal to 1.15 times that of bond 1, find the face value F. (4b). If F = $100, how long will it take the value of bond 2 to reach $110 for the first time ?
Solutions
Rahul Sunny answered 1 year agoRelated Solutions
Consider two bonds: 1) a zero-coupon bond having a face value F and maturity 1 year;...
Consider two bonds: 1) a zero-coupon bond having a face value F
and maturity 1 year; 2) a coupon bond with face value F, coupons C
= 15 paid annually and maturity 3 years. Assume that the
continuously compounded interest rate is 10%.
a) If F = 100, find at the end of which year the price of the
second bond will be for the first time below 110?
b) If the price of the second bond is equal to...
Consider two bonds: 1) a zero-coupon bond having a face value F and maturity 1 year;...
Consider two bonds: 1) a zero-coupon bond having a face value F
and maturity 1 year; 2) a coupon bond with face value F, coupons C
= 15 paid annually and maturity 3 years. Assume that the
continuously compounded interest rate is 10%.
a) If F = 100, find at the end of which year the price of the
second bond will be for the first time below 110?
b) If the price of the second bond is equal to...
Consider a zero-coupon bond maturing in 2 years with a face value of $1,000 and a...
Consider a zero-coupon bond maturing in
2 years with a face value of $1,000 and a yield to maturity of 2%.
Assume the recovery rate is 40%, and that default can only happen
exactly at the end of the 2-year period. There is a credit default
swap (CDS) available for this bond, and the premium is 0.8%.
For both a bondholder and a CDS buyer (with notional value
$1,000), compute the cash flows two years from today in the case...
Suppose you purchase a zero coupon bond with a face value of $1,000, maturing in 19...
Suppose you purchase a zero coupon bond with a face value of
$1,000, maturing in 19 years, for $215.75. Zero coupon bonds pay
the face value on the maturity date.Whatis the implicit interest in
the first year of the bond's life?
Suppose you purchase a zero coupon bond with a face value of $1,000, maturing in 18...
Suppose you purchase a zero coupon bond with a face value of
$1,000, maturing in 18 years, for $214.70. Zero coupon bonds pay
the investor the face value on the maturity date. What is the
implicit interest in the first year of the bond’s life?
2) There is a 7% coupon bond (semiannual) maturing in 2 years. A face value is...
2) There is a 7% coupon bond (semiannual) maturing in 2 years. A
face value is $1,000. Then the price of the bond is $ . (Note:Round
to the nearest hundredth.) 1) What are the 1.5 year and 2 year
forward rates? (Note: Round to the nearest hundredth.)
Maturity (Year)
Spot Rate
Forward Rate
0.5
3.01 %
3.01%
1
3.21 %
3.41%
1.5
3.53 %
%
2
3.87 %
%
Suppose you purchase a zero coupon bond with face value $1,000, maturing in 27 years, for...
Suppose you purchase a zero coupon bond with face value $1,000,
maturing in 27 years, for $693.33. What is the implicit interest,
in dollars, in the first year of the bond's life?
Consider a zero-coupon bond with a $100 face value maturing in 5 years. What is the yield to maturity of this bond if it is currently trading at $72?
a. Consider a zero-coupon bond with a $100 face value maturing
in 5 years. What is the yield to maturity of this bond if it is
currently trading at $72? Answer in percent, rounded to one decimal
place.b. What is the value of a ten-year 6% annual coupon bond with
face value of $1,000, assuming yield-to-maturity of 5%. Round to
the nearest cent.c. What is the value of a 20-year 4% coupon bond withsemi-annual coupons, $1,000 face value, and a...
Portfolio A consists of a 2-year zero-coupon bond with a face value of $8,000 and a...
Portfolio A consists of a 2-year zero-coupon bond with a face
value of $8,000 and a 10-year zero-coupon bond with a face value of
$2,000. The current yield on all bonds is 11.75% per annum. (Answer
with two decimal digits accuracy)
The duration of portfolio A is
The (zero coupon) U.S. Treasury strip maturing in one year and having a face value of...
The (zero coupon) U.S. Treasury strip maturing in one year and
having a face value of $1000 is selling at an annualized yield to
maturity of 2.40 percent, which is equivalent to a price of
97.65625 percent of par (face) value. The (zero coupon) U.S.
Treasury strip (with a face value of $1000) maturing in two years
is selling at an annualized yield to maturity of 2.8 percent, which
is equivalent to a price of 95.083 percent of par value....
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