Arco Industries has a bond outstanding with 15 years to maturity, an 8.25% nominal coupon, semiannual payments, and a $1,000 par value. The bond has a 7.20% yield to maturity, but it can be called in 6 years at a price of $1,045. What is the bond's yield to call? Hint: Calculate the bond's price based on the YTM, and then use that price to find the YTC. Your answer should be between 4.08 and 10.64, rounded to 2 decimal places, with no special characters.
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- A bond with face value $1399 and a term of 11 years pays quarterly coupons of 11% per annum. The bond is offered at a price of $1050. You are to enter the above values into a spreadsheet, along with - an initial wild guess at what the yield would be, and - a calculation of the bond price using your guess as the yield. (a) Use Excel’s “Solver” (which is different from “Goal Seek”) to solve for the actual yield that produces the correct bond price. Take a screen shot of your computer with “Solver” open showing clearly the entries that you put into Solver. Paste the screen shot into an application (like Paint), and save it as a (.png) file. Upload your screenshot below. (b) What is the yield calculated by Solver?A newly issued bond with 1 year to maturity has a price of $1,000, which equals its face value. The coupon rate is 15% and the probability of default in 1 year is 35%. The bond’s payoff in default will be 65% of its face value. a. Calculate the bond’s expected return. b. Use a data table to show the expected return as a function of the recovery percentage and the price of the bond. Please show how you got part B using all functions.The closing price of a U.S. Treasury bond with a face value of $1400 is quoted as 105.45 points, for a current yield of 3.7%. If you buy this bond, how much annual interest will you receive? Make sure your final answer is in a statement form. Show all your math formula/setun math work, and your answer in the space below.
- Solve the following questions without using Excel. A 5 year bond with a coupon of 7%, that pays interest annually, has its next coupon due in 12 months. It yields 5% per annum. a) compute the duration of the bond. Use this to compute approximately how the price of the bond will change if yields rise to 6%. (b) Compute the convexity of the bond. Use this to obtain a more precise estimate of the change in the price which will occur if the yield rises to 6%.The YTM on a bond is the interest rate you earn on your investment if interest rates don't change. If you actually sell the bond before it matures, your realized return is known as the holding period yield (HPY). a. Suppose that today you buy an annual coupon bond with a coupon rate of 8.3 percent for $785. The bond has 8 years to maturity and a par value of $1,000. What rate of return do you expect to earn on your investment? Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16. b-1. Two years from now, the YTM on your bond has declined by 1 percent, and you decide to sell. What price will your bond sell for? Note: Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16. b-2. What is the HPY on your investment? Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16. a. Rate of return b-1. Price b-2. Holding period…You own a bond with a par value of $1,000 and a coupon rate of 7.00% (semiannual coupon). You know it has a current yield of 9.00%. What is its yield to maturity? The bond has 5 years to maturity.Current Yield = (annual payment / price). (hint: solve for price to answer the question). Group of answer choices
- The YTM on a bond is the interest rate you earn on your investment if interest rates don't change. If you actually sell the bond before it matures, your realized return is known as the holding period yield (HPY). a. Suppose that today you buy an annual coupon bond with a coupon rate of 8.4 percent for $825. The bond has 8 years to maturity and a par value of $1,000. What rate of return do you expect to earn on your investment? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) b-1. Two years from now, the YTM on your bond has declined by 1 percent, and you decide to sell. What price will your bond sell for? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b-2. What is the HPY on your investment? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) X Answer is complete but not entirely correct. Rate of return…Suppose that a 1-year zero-coupon bond with face value $100 currently sells at $89.75, while a 2-year zero sells at $79.88. You are considering the purchase of a 2-year-maturity bond making annual coupon payments. The face value of the bond is $100, and the coupon rate is 10% per year. Required: What is the yield to maturity of the 2-year zero? What is the yield to maturity of the 2-year coupon bond? What is the forward rate for the second year? If the expectations hypothesis is accepted, what are (1) the expected price of the coupon bond at the end of the first year and (2) the expected holding-period return on the coupon bond over the first year? Will the expected rate of return be higher or lower if you accept the liquidity preference hypothesis?Consider a bond with a coupon rate of 14% and coupons paid semiannually. The par value isS1000 and the bond has 7 years to maturity. The yield to maturity is 16%.Required:Find present values based on the payment periodHow many coupon payments are there?What is the semiannual coupon payment?What is the semiannual yield?
- Calculate the price of a $1,000, 5% bond with three years to maturity with 7.5% market interest rates. Assume annual coupon payments.What is the duration of this bond?Using the duration price approximation formula, calculate the expected price change in % if interest rates fall to 7.0%. If your answer is negative, don't forget the sign!A bond has 10 years until maturity, a coupon rate of 9%, and sells for $1,100. Interest is paid annually. (Assume a face value of $1,000.) If the bond has a yield to maturity of 9% 1 year from now, what will its price be at that time? Note: Do not round intermediate calculations. What will be the rate of return on the bond? Note: Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. Negative amount should be indicated by a minus sign. If the inflation rate during the year is 3%, what is the real rate of return on the bond? Note: Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. Negative amount should be indicated by a minus sign.Calculate the modified duration of a bond that pays an annual coupon at a rate of 6% and matures in 2 years. This bond has a face value of 1,000 and is currently selling at a yield of 8%. Show calculations. Using just modified duration, if yield changes by 0.5%, what is the expected change in the price of the bond? Show calculations. Use the timeline method for this. Solving this in a calculator or at some other website that allows you to solve this kind of question and just putting the value is not going to be an acceptable answer.