Question
In: Finance
If a bond's yield to maturity does not change, the return on the bond each year...
If a bond's yield to maturity does not change, the return on the bond each year will be equal to the yield to maturity. Confirm this for both a premium and a discount bond using a 4-year 4.4 percent coupon bond with annual coupon payments and a face value of $1,000.
a. Assume the yield to maturity is 3.4 percent.
What is the current value of the bond? (Do not round intermediate calculations. Round your answer to 2 decimal places.)
Bond price today $
What will the bond value be in one year? (Do not round intermediate calculations. Round your answer to 2 decimal places.)
Bond price in one year $
What is the rate of return for the first year? (Do not round intermediate calculations. Enter your answer as a percent rounded to 1 decimal place.)
Rate of return %
b. Assume the yield to maturity is 5.4 percent.
What is the current value of the bond? (Do not round intermediate calculations. Round your answer to 2 decimal places.)
Bond price today $
What will the bond value be in one year? (Do not round intermediate calculations. Round your answer to 2 decimal places.)
Bond price in one year $
What is the rate of return for the first year? (Do not round intermediate calculations. Enter your answer as a percent rounded to 1 decimal place.)
Rate of return %
Solutions
jeff jeffy answered 1 year agoRelated Solutions
A 9-year maturity, AAA rated corporate bond has a 6% coupon rate. The bond's promised yield...
A 9-year maturity, AAA rated corporate
bond has a 6% coupon rate. The bond's promised yield is currently
5.75%. The bond pays interest semiannually.
What is the bond's duration?
What is the bond's convexity?
If promised yields decrease to 4.85% what is the bond's
predicted new price, excluding convexity? What is the bond's
predicted new price including convexity?
If promised yields increase to 6.5% what is the bond's
predicted new price, excluding convexity? What is the bond's
predicted new price...
why occurrence change in bond price as a function of change in yield to maturity and...
why occurrence change in bond price as a function of change in
yield to maturity and discuss how duration impacts the sensitivity
of a bond. why is the feature a concern? what does this mean for
investors? can investors avoid this feature, why or why not?
why occurrence change in bond price as a function of change in yield to maturity and...
why occurrence change in bond price as a function of change in
yield to maturity and discuss how duration impacts the sensitivity
of a bond.
why is the feature a concern?
what does this mean for investors?
can investors avoid this feature, why or why not?
Yield to maturity on a bond is:
Yield to maturity on a bond is:I. Above the coupon rate when the bond sells at a discount and
below the coupon rate when the bond sells at a premiumII. The discount rate that will set the present value of the
payments equal to the bond priceIII. Equal to the true compound return on investment only if all
interest payments received are reinvested at the yield to
maturityGroup of answer choicesI, II, and IIII and II onlyII onlyI only
the rate of return to the buyer of the bond is called a. Yield-to-maturity b. current...
the rate of return to the buyer of the bond is called
a. Yield-to-maturity
b. current yield
c. market rate
d. coupon rate
e. call rate
19. A 20-year, 6.500% annual payment bond settles on a coupon date. The bond's yield to...
19. A 20-year, 6.500% annual payment bond settles on a coupon
date. The bond's yield to maturity is 9.400%
(b) What is the bond’s approximate modified duration? Use yield
changes of +/- 30 bps around the yield to maturity for your
calculations
20. Consider the bond from problem (19) above.
(a) Calculate the approximate convexity for the bond.
(b) Calculate the change in the full bond price for a 40 bps
change in yield.
I need an answer for
20. show...
A 12.25-year maturity zero-coupon bond selling at a yield to maturity of 8% (effective annual yield)...
A 12.25-year maturity zero-coupon bond selling at a yield to
maturity of 8% (effective annual yield) has convexity of 139.2 and
modified duration of 11.34 years. A 40-year maturity 6% coupon bond
making annual coupon payments also selling at a yield to maturity
of 8% has nearly identical modified duration—-12.30 years—but
considerably higher convexity of 272.9.
a. Suppose the yield to maturity on both bonds increases to 9%.
What will be the actual percentage capital loss on each bond? What...
A 12.75-year maturity zero-coupon bond selling at a yield to maturity of 8% (effective annual yield)...
A 12.75-year maturity zero-coupon bond selling at a yield to
maturity of 8% (effective annual yield) has convexity of 150.3 and
modified duration of 11.81 years. A 30-year maturity 6% coupon bond
making annual coupon payments also selling at a yield to maturity
of 8% has nearly identical duration—11.79 years—but considerably
higher convexity of 231.2.
Suppose the yield to maturity on both bonds increases to 9%.
What will be the actual percentage capital loss on each bond? What
percentage capital...
A 13.05-year maturity zero-coupon bond selling at a yield to maturity of 8% (effective annual yield)...
A 13.05-year maturity zero-coupon bond selling at a yield to
maturity of 8% (effective annual yield) has convexity of 120.2 and
modified duration of 11.91 years. A 40-year maturity 6% coupon bond
making annual coupon payments also selling at a yield to maturity
of 8% has nearly identical modified duration—-11.65 years—-but
considerably higher convexity of 280.2.
a.
Suppose the yield to maturity on both bonds increases to 9%.
What will be the actual percentage capital loss on each bond? What...
A 14.55-year maturity zero-coupon bond selling at a yield to maturity of 7% (effective annual yield)...
A 14.55-year maturity zero-coupon bond selling at a yield to
maturity of 7% (effective annual yield) has convexity of 197.7 and
modified duration of 13.60 years. A 40-year maturity 5% coupon bond
making annual coupon payments also selling at a yield to maturity
of 7% has nearly identical modified duration—-13.96 years—but
considerably higher convexity of 338.8.
a. Suppose the yield to maturity on both bonds
increases to 8%.
What will be the actual percentage capital loss on each
bond?
What...
ADVERTISEMENT
ADVERTISEMENT
Latest Questions
- Write a c++ program to load two column of numbers, do arithmetic operations to the data...
- A forklift can be leased for $3000 per month, with maintenance and insurance included. Alternatively, the...
- Assume that I can borrow money at a rate of 10% per year, but that I...
- The newly elected president Susan implements some policies with the intention of boosting income. She succeeds...
- Multiple Production Department Factory Overhead Rates The total factory overhead for Urban Styles, Inc. is budgeted...
- using this code under, I want when the user input only letter q an error message...
- 1. Keeping in mind the various definitions of operating system, consider whether the operating system should...
ADVERTISEMENT