Question
In: Finance
You will receive $100 from a zero-coupon savings bond in 3 years. The nominal interest rate...
You will receive $100 from a zero-coupon savings bond in 3 years. The nominal interest rate is 7.20%.
a. What is the present value of the proceeds from the bond? (Do not round intermediate calculations. Round your answer to 2 decimal places.)
b. If the inflation rate over the next few years is expected to be 2.20%, what will the real value of the $100 payoff be in terms of today’s dollars? (Do not round intermediate calculations. Round your answer to 2 decimal places.)
c. What is the real interest rate? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)
d. Show that the real payoff from the bond [from part (b)] discounted at the real interest rate [from part (c)] gives the same present value for the bond as you found in part (a). (Do not round intermediate calculations. Round your answer to 2 decimal places.)
Solutions
jeff jeffy answered 2 years agoRelated Solutions
You will receive $100 from a zero-coupon savings bond in 4 years. The nominal interest rate...
You will receive $100 from a zero-coupon savings bond in 4
years. The nominal interest rate is 8.80%.
a. What is the present value of the proceeds
from the bond?
b. If the inflation rate over the next few
years is expected to be 3.80%, what will the real value of the $100
payoff be in terms of today’s dollars?
c. What is the real interest rate?
Suppose that you purchase a $1,000 zero-coupon bond that matures 3 years from now and is...
Suppose that you purchase a $1,000 zero-coupon bond that matures
3 years from now and is priced to yield 4.5%., Assume interest is
compounded semi-annually.
a. How much will you pay for the bond with exactly 3 years to
maturity?
b. One year later, if interest rates remain the same, what will
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c. If you paid $850 for the bond with 3 years to maturity, and
held it until maturity, what will be your...
1).Consider a zero coupon bond with 10 years maturity with face value $100. The internal rate...
1).Consider a zero coupon bond with 10 years maturity with face
value $100. The internal rate of return (IRR, y) is 8% and the
daily volatility of the IRR is 0.0007 (7 basis points). Required: •
Compute the percentage VaR over 1-day and under 99% confidence
level. • Compute the dollar VaR over 1-day and under 99% confidence
level.
2).Consider the risk of a short position on a call option. The
VaR of its underlying asset is 2000. The delta...
You receive a $25,000 car LEASE at 6% nominal annual for 3 years. Interest is compounded...
You receive a $25,000 car LEASE at 6% nominal annual for 3
years. Interest is compounded monthly and you make monthly
payments. Your Residual value at the end of your lease is $15,000.
Assume LEASE payments are made at the END of the month, (first
payment due end of first month). You can also get a LOAN for the
same terms (although you will pay off the entire car in 3
years).
Assume your MARR for investment is 4% annual...
You receive a $25,000 car LEASE at 6% nominal annual for 3 years. Interest is compounded...
You receive a $25,000 car LEASE at 6% nominal annual for 3
years. Interest is compounded monthly and you make monthly
payments. Your Residual value at the end of your lease is $15,000.
Assume LEASE payments are made at the END of the month, (first
payment due end of first month). You can also get a LOAN for the
same terms (although you will pay off the entire car in 3
years).
Assume your MARR for investment is 4% annual...
Bond T is a coupon bond with a coupon rate of 2% maturing in 3 years....
Bond T is a coupon bond with a coupon rate of 2% maturing in 3
years. The bond pays coupon annually, and has a face value of
$100.15. What is the Macaulay duration of the coupon bond
Calculate the price of a zero-coupon bond that matures in 13 years if the market interest...
Calculate the price of a zero-coupon bond that matures in 13
years if the market interest rate is 6.15 percent. Assume
semiannual compounding. (Do not round intermediate
calculations and round your final answer to 2 decimal
places.)
Treasury note
Corporate bond
Municipal bond
Calculate the price of a zero-coupon bond that matures in 23 years if the market interest...
Calculate the price of a zero-coupon bond that matures in 23
years if the market interest rate is 4.2 percent. Assume semiannual
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We consider to purchase 5-years zero-coupon bond with the nominal value of 1000 USD and YTM...
We consider to purchase 5-years zero-coupon bond with the
nominal value of 1000 USD and YTM of 4 %. We would like
to invest in this bond
For 3 years
For 7 years
What would be your yield/loss if the
day after the bond purchase
YTM will increase by 1 %
YTM will decrease by 1 %
Please all the explanations. Thank
you
1. We consider to purchase 5-years zero-coupon bond with the nominal value of 1000 USD and...
1. We consider to purchase 5-years zero-coupon bond with the
nominal value of 1000 USD and YTM of 4 %. We would like to invest
in this bond
a) For 3 years
b) For 7 years
What would be your yield/loss if the day after the bond
purchase
a) YTM will increase by 1 %
b) YTM will decrease by 1 %
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