Peter buys a bond with a face value of $100, a time to maturity of four...

Peter buys a bond with a face value of $100, a time to maturity of four years, a coupon of 4% pa with semi-annual payments and a yield of 3% pa. Fifteen months later, the Reserve Bank of Australia unexpectedly increases the cash rate. The yield on Peter's bond increases to 3.5% pa. Peter sells the bond. Calculate the buying and selling price of the bond.

Solutions

Expert Solution

Calculation is shown below

Working is given below

jeff jeffy answered 1 year ago

Next > < Previous

Related Solutions

A Treasury bond with 6 months to maturity, with face value of $100, and a coupon...

A Treasury bond with 6 months to maturity, with face value of $100, and a coupon rate of 5% trades for 99:25 and a Treasury bond with 1 year to maturity with a face value of $100 and a coupon rate of 5% trades for 98:27. Determine the 6-month and 1-year risk-free rates of return please do without excel or a financial calculator and show formulas used THE QUESTION IS PRICED LIKE T BILLS BUT ITS SUPPOSED TO BE A...

A bond portfolio named VEX, comprises four bonds (face value=$1000): 100 semi-annual bond, 5-year maturity, a...

A bond portfolio named VEX, comprises four bonds (face value=$1000): 100 semi-annual bond, 5-year maturity, a coupon rate of 4% 200 annual bonds, 30-year maturity, 8% coupon bond. 300 zero coupon bonds, 10-year maturity. 400 zero coupon bonds, 20-year maturity. a) If required yield (discount rate) is 6% for all bonds per year, what is the market fair value of VEX? What is each bond’s weight in the portfolio? b) Given the 6% initial yield, what is the VEX’s duration...

A bond has a face value of $1000 with a time to maturity ten years from...

A bond has a face value of $1000 with a time to maturity ten years from now. The yield to maturity of the bond now is 10%. a) What is the price of the bond today, if it pays no coupons? b) What is the price of the bond if it pays annual coupons of 8%? c) What is the price today if pays 8% coupon rate semi-annually?

A bond portfolio named VEX comprises four bonds (face value=$1000): 1) 100 semi-annual bond, 5-year maturity,...

A bond portfolio named VEX comprises four bonds (face value=$1000): 1) 100 semi-annual bond, 5-year maturity, a coupon rate of 4% 2) 200 annual bonds, 30-year maturity, 8% coupon bond. 3) 300 zero-coupon bonds, 10-year maturity. 4) 400 zero-coupon bonds, 20-year maturity. 1. If the required yield (discount rate) is 6% for all bonds per year, what is the market fair value of VEX? What is each bond’s weight in the portfolio?

A bond portfolio named VEX comprises four bonds (face value=$1000): 1) 100 semi-annual bond, 5-year maturity,...

A bond portfolio named VEX comprises four bonds (face value=$1000): 1) 100 semi-annual bond, 5-year maturity, a coupon rate of 4% 2) 200 annual bonds, 30-year maturity, 8% coupon bond. 3) 300 zero-coupon bonds, 10-year maturity. 4) 400 zero-coupon bonds, 20-year maturity. 2. Given the 6% initial yield, what is the VEX’s duration (use Macaulay’s duration)?

A bond portfolio named VEX comprises four bonds (face value=$1000): 1) 100 semi-annual bond, 5-year maturity,...

A bond portfolio named VEX comprises four bonds (face value=$1000): 1) 100 semi-annual bond, 5-year maturity, a coupon rate of 4% 2) 200 annual bonds, 30-year maturity, 8% coupon bond. 3) 300 zero-coupon bonds, 10-year maturity. 4) 400 zero-coupon bonds, 20-year maturity. 3. What is the time to maturity of VEX? Is VEX’s duration shorter or longer than its time to maturity? What is the meaning of VEX’s duration, how to interpret it?

A bond portfolio named VEX comprises four bonds (face value=$1000): 1) 100 semi-annual bond, 5-year maturity,...

A bond portfolio named VEX comprises four bonds (face value=$1000): 1) 100 semi-annual bond, 5-year maturity, a coupon rate of 4% 2) 200 annual bonds, 30-year maturity, 8% coupon bond. 3) 300 zero-coupon bonds, 10-year maturity. 4) 400 zero-coupon bonds, 20-year maturity. According to the price-duration formula with Macaulay’s duration D, if the yield increases from 6% to 7%, the VEX’s market value should fall by how much ($)?

James buys a newly issued, $1,000 face value, 10-year maturity bond with a coupon rate of...

James buys a newly issued, $1,000 face value, 10-year maturity bond with a coupon rate of 12% (coupons are semi-annual) at $1,000. What is the current yield to maturity (YTM, nominal and semi-annually compounded) of this bond? A. 13.42% B. 10% C. 8% D. 12%

Consider a 5% 1 year to maturity coupon bond with a face value of $100. If the price of the bond is $90, what is the yield to maturity?

A zero-coupon bond with face value $1,000 and maturity of four years sells for $737.22. a....

A zero-coupon bond with face value $1,000 and maturity of four years sells for $737.22. a. What is its yield to maturity? (Round your answer to 2 decimal places.) b. What will the yield to maturity be if the price falls to $721?

Subjects