A BBB-rated corporate bond has a yield to maturity of
7.0 %7.0%.
A U.S. treasury security has a yield to maturity of
5.1 %5.1%.
These yields are quoted as
APRs
with semiannual compounding. Both bonds pay semi-annual coupons at a rate of
5.6 %5.6%
and have five years to maturity.
a. What is the price (expressed as a percentage of the face value) of the treasury bond?
b. What is the price (expressed as a percentage of the face value) of the BBB-rated corporate bond?
c. What is the credit spread on the BBB bonds?
In: Finance
A sample of n = 1,033 adults in the United States was asked, "Do you think the police should or should not be allowed to collect DNA information from suspected criminals, similar to how they take fingerprints?" Of those sampled, 68% answered "should". (Round your answers to the nearest tenth.)
(a) Calculate the conservative margin of error for the survey, as a percentage.
(b) Compute an approximate 95% confidence interval for the percentage of all American adults who think police should be allowed to collect DNA information from suspected criminals.
In: Statistics and Probability
What is a loan amortization schedule? How would you use it to determine your loan interest rate? In which months is most of the interest paid? Why? What is the percentage difference of interest paid with a 30-yr. loan vs. a 15-yr. loan as a percentage of the 15-yr. loan interest amount? What factors would affect your choice between two loans? Would making payments two weeks early each month make much difference in the total amount paid?
In: Finance
Consider two bonds with $1,000 face values that carry coupon rates of 5%, make annual coupon payments, and exhibit similar risk characteristics. The first bond has two years to maturity whereas the second has three years to maturity. The yield to maturity of these investments is 5%. If the yield to maturity rises by half a percentage point, what are the respective percentage price changes of the two bonds? Find the exact answer and approximate answers using the duration rule and the duration-convexity rule. Discuss the quality of the approximation.
In: Finance
Assuming the standard US Par (Face) value of $1000,
Annual coupon = $100 x 6% = $60
a) Consider a 20-year 6 percent coupon bond.
i) What is the price of this bond if the market yield is 8%?
ii) What is the percentage change in the price of this bond if the market yield rises to 9%?
b) Consider a 20-year 7 percent coupon bond.
iii) What is the price of this bond if the market yield is 8%?
iv) What is the percentage change in the price of this bond if the market yield rises to 9%?
In: Economics
Bond RTY.AF has a 5 percent coupon, makes semiannual payments, currently has 18 years remaining to maturity, and is currently priced at par value. If interest rates suddenly rise by 2 percent, what is the percentage change in the price of Bond RTY.AF? Be sure to include the sign, especially if the bond price falls and the percentage change is negative. (Do not include the percent sign (%). Enter rounded answer as directed, but do not use the rounded numbers in intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).)
In: Finance
An investor purchased the following three bonds. Each bond has a par value of $500. Each bond has a 5% yield on maturity on purchase day. Immediately after the purchase, the interest rate fell, and each had a new yield to maturity of 4%. What is the percentage change in the price of each bond after the fall in interest rates? Please complete the table below:
Bond Price at 5% Price at 4% Percentage Change
5 year, 5% annual coupon ___________ ________ ________
2-year zero ___________ _________ ________
$15 perpetuity ___________ _________ ________
In: Finance
The Acme Company manufactures widgets. The distribution of widget weights is bell-shaped. The widget weights have a mean of 37 ounces and a standard deviation of 6 ounces. Use the Standard Deviation Rule, also known as the Empirical Rule. Suggestion: sketch the distribution in order to answer these questions. a) 95% of the widget weights lie between and b) What percentage of the widget weights lie between 19 and 49 ounces? % c) What percentage of the widget weights lie above 31 ? % Get help: Video LicensePoints possible: 2
In: Statistics and Probability
1. Explain the importance of each of the special journals and what, if any, unique characteristics can be identified.
2. What method of accounting for uncollectible accounts is generally required for financial accounting purposes?
3. Describe the steps to follow when using the allowance method to account for uncollectible expenses.
4. Describe the process followed when estimating bad debt expense under the percentage of sales method.
5. Describe the process followed when estimating uncollectible accounts under the percentage (aging) of receivables method.
In: Accounting
Bond value and changing required returns Bond X pays an 8% annual coupon and Bond Y pays a 4% annual coupon. Both bonds have 10 years to maturity. The yield to maturity for both bonds is now 8%.
a. If the interest rate suddenly rises by 2%, by what percentage will the price of the two bonds change?
b. If the interest rate suddenly drops by 2%, by what percentage will the price of the two bonds change?
c. Which bond has more interest rate risk? Why?
In: Finance