Compute the duration of a bond with a face value of $1,000, a maturity of 10...

Compute the duration of a bond with a face value of $1,000, a maturity of 10 years and a yield to maturity of 7%. Compute the duration for coupon rates ranging from 2% to 12% (in increments of 1%). What happens to duration as the coupon rate increases?

Solutions

Expert Solution

jeff jeffy answered 8 months ago

Next > < Previous

Related Solutions

Compute the duration of a bond with a face value of $1,000, a coupon rate of...

Compute the duration of a bond with a face value of $1,000, a coupon rate of 7% (coupon is paid annually) and a yield to maturity of 7% for maturities of 2 to 18 years in 1-year increments (so here we are going to vary the time to maturity and see how duration changes if N=2, 3 … etc.). What happens to duration as maturity increases?

Compute the duration of a bond with a face value of $1,000, a coupon rate of...

Compute the duration of a bond with a face value of $1,000, a coupon rate of 7% (coupon is paid annually) and a maturity of 10 years as the interest rate (or yield to maturity) on the bond changes from 2% to 12% (consider increments of 1% - so you need to compute the duration for various yields to maturity 2%, 3%, …, 12%) . What happens to duration as the interest rate increases?

Bond A is a 10% coupon bond with a face value of $1,000 and a maturity...

Bond A is a 10% coupon bond with a face value of $1,000 and a maturity of 3 years. The discount rate (required return, or interest rate) is 8% now or in the future. A. What is the bond price now, in year 1, in year 2, and in year 3 (P0,P1,P2 and P3)? B. If you buy the bond now and hold it for one year, what is the (expected) rate of return? C. If you buy...

A bond with 10 years to maturity has a face value of $1,000. The bond pays an...

A bond with 10 years to maturity has a face value of $1,000. The bond pays an 8 percent semiannual coupon, and the bond has a 10.8 percent nominal yield to maturity. What is the price of the bond today?

1. A bond with 10 years to maturity has a face value of $1,000. The bond...

1. A bond with 10 years to maturity has a face value of $1,000. The bond can be called in four years for $1050. The bond pays an 6 percent semiannual coupon, and the bond has a 3.3 percent nominal yield to maturity. What is the price of the bond today assuming that it will be called? 2. A corporate bond that matures in 12 years pays a 9 percent annual coupon, has a face value of $1,000, and a current...

A T-bond is sold as STRIP. The face value per bond is $1,000. Maturity is 10...

A T-bond is sold as STRIP. The face value per bond is $1,000. Maturity is 10 years and coupon rate is 6% APR but coupons are paid semi-annually and YTM is 7.5% APR. Use this information to answer the following: What is the price of 6thpayment? If your plan is to raise $150,000 by using a) above then how many strips would you purchase? What is the cost if you are buying principle strip and how many strips would be...

Bond Face Value Coupon rate Yield to Maturity Term to Maturity Duration A $1000 4% 10%...

Bond Face Value Coupon rate Yield to Maturity Term to Maturity Duration A $1000 4% 10% 5 4.57 B $1000 12% 10% 5 4.07 Now suppose the yield to maturity becomes 11%. What are the % change in prices of bond A and B?

A bond with a face value of $1,000 has 10 years until maturity, carries a coupon...

A bond with a face value of $1,000 has 10 years until maturity, carries a coupon rate of 7.7%, and sells for $1,130. Interest is paid annually. a. If the bond has a yield to maturity of 10.3% 1 year from now, what will its price be at that time? (Do not round intermediate calculations.) b. What will be the annual rate of return on the bond? (Do not round intermediate calculations. Enter your answer as a percent rounded to...

A bond with a face value of $1,000 has 10 years until maturity, carries a coupon...

A bond with a face value of $1,000 has 10 years until maturity, carries a coupon rate of 7.1%, and sells for $1,190. Interest is paid annually. (Assume a face value of $1,000 and annual coupon payments.) a. If the bond has a yield to maturity of 10.9% 1 year from now, what will its price be at that time? (Do not round intermediate calculations. Round your answer to nearest whole number.) b. What will be the rate of return...

A bond with a face value of $1,000 has 10 years until maturity, carries a coupon...

A bond with a face value of $1,000 has 10 years until maturity, carries a coupon rate of 7.6%, and sells for $1,140. Interest is paid annually. (Assume a face value of $1,000 and annual coupon payments.) a. If the bond has a yield to maturity of 10.4% 1 year from now, what will its price be at that time? (Do not round intermediate calculations. Round your answer to nearest whole number.) b. What will be the rate of return...

Subjects