None An investor wants to find the duration of a(n) 15-year,5% semiannual pay, noncallable bond that's currentlypriced in the market at 3518.23, to yield 12%. Usinga 250 basis point change in yield, find the effectiveduration of this bond (Hint use Equation 11.11). Thenew price of the bond if the market interest ratedecreases by 250 basis points (or 2.5% ) is: □ (Roundto the nearest cent.)

Equation 11.11DMacaulay=1/p(dp/dy) To find dp/dy, we'll compute the price at…

Answered: An investor wants to find the duration…

Pfin (with Mindtap, 1 Term Printed Access Card) (mindtap Course List)

7th Edition

ISBN:9780357033609

Author:Randall Billingsley, Lawrence J. Gitman, Michael D. Joehnk

Publisher:Randall Billingsley, Lawrence J. Gitman, Michael D. Joehnk

Chapter12: Investing In Stocks And Bonds

Section: Chapter Questions

Problem 6FPE

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You have decided to invest in Bond x, an n-year bond with semi-annual coupons and the following characteristics: Par value is 1000 The ratio of the semi - annual coupon rate to the desired semi- annual yield rate, is 1.03125. The present value of the redemption value is 381.5. Given v=0.5889, what is the price of bond x ? A) 1,055 B) 1,072 C ) 1,073 D) 1,069 E) 1,044
An investor wants to find the duration of a(n) 30-year, 9% semiannual pay, noncallable bond that's currently priced in the market at $649.02, to yield 14%. Using a 50 basis point change in yield, find the effective duration of this bond (Hint: use Equation 11.11). The new price of the bond if the market interest rate decreases by 50 basis points (or 0.5%) is $ (Round to the nearest cent.) C
The current price of a 1-year $1000 zero-coupon bond is $943.40. Suppose the one-year forward rate in year 1 is f₁ = 6.8% and the one-year forward rate in year 2 is f₂ = 7.5%. Compute the price of a 2-year $1000 zero-coupon bond and a 3-year $1000 zero-coupon bond using these forward rates and the implied spot rate from the 1-year bond.
An investor wants to find the duration of a(n) 15-year, 6% semiannual pay, noncallable bond that's currently priced in the market at $587.05, to yield 12%. Using a 150 basis point change in yield, find the effective duration of this bond (Hint: use Equation 11.11). Question content area bottom Part 1 The new price of the bond if the market interest rate decreases by 150 basis points (or 1.5%) is $enter your response here. (Round to the nearest cent.)
Let's denote the price of a nonmaturing bond (called a consol) as P. The equation that indicates this price is Pn =-, where I is the annual net income the bond generates and r is the nominal market interest rate. a. Suppose that a bond promises the holder $200 per year forever. The nominal market interest rate is 6 percent. Calculate the bond's current price: S. (Round your answer to the nearest whole dollar.)
You are given the following spot rates: s1 = 6%, s2 = 7%, s3 = 8%.Calculate the YTM for a 3 year bond that sells for the present value of its cash flows. The bond has 6% coupons that are paid annually and is redeemed for its $1,000 par value. Answer Choices: a) 7.12% b) 7.50% c) 7.76% d) 7.92%
calculate the price of a $1,000, 5% bond with 4 years to maturity with 6.5 % market interest rates. what is the duration of this bond? calculare the expected orice change in $s if interest rates increase to 7% using the duration price approximation forumula
Consider an annual 2 year coupon bond paying a coupon rate of 7%. If it is 1000 par and the YTM= .06 A) What is the price of this bond? Answer: 1018.33 B) What is thebond’s modified duration? Answer: 1.82 C) Use the bond’s modified duration to estimate the pricechange of the bond if YTM changes to .055. (So positiveprice change of $40.2 would be written 40.2 and a negativeprice change of $40.2 would be writen as-40. Answer: 9.29 D) Price at 10 yearsemi-annual coupon bond with a 5%coupon rate and a YTM of 8%. If par is 1000. Answer: 796.14 Note: Please explain without using excel.Thanks
The one-year spot rate z1 = 5% and the forward price for a one-year zero-coupon bond beginning in one year is 0.9346. Find the spot price (zero price) of a two-year zero-coupon bond.
The current zero-coupon yield curve for risk-free bonds is as follows What is the price per $100 face value of a two-year, zero-coupon, risk-free bond? The price per $100 face value of the two-year, zero-coupon, risk-free bond is $ ____ (Round to the nearest cent.)
Consider a $1,000-par-value Bond with the following characteristics: a current market price of $761, 12 years until maturity, and an 8% coupon rate. We want to determine the discount rate that sets the present value of the bond’s expected future cash-flow stream to the bond’s current market price. You are required to determine the discount rate that equates the present value of the bond?
A 30-year maturity bond making annual coupon payments with a coupon rate of 11.00% has a ation of 13.50 years. The bond currently sells at a yield to maturity of 5.75%. Ducation a. Find the exact dollar price of the bond if its yield to maturity falls to 4.75%. What is the % change in price? b. Assume that you need to make a quick approximation using the duration rule. What is the % change in price as approximated by the duration rule when the yield to maturity falls to 4.75%? c. Does the duration-rule provide a good approximation of the % price change in this case? Why or why not?

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