Assume that the interest rates stay constant. The duration of the bond at time t = 0 is D. Show that the duration before the first coupon payment changes with time according to D – t.

If interest rates increase, after a bond is issued, the yield to maturity will _____________.

The value of the interest rate depends on the --------- of the time period. Select one: a. length b. size c. minimum d. maximum

Unlike the coupon interest rate, which is fixed, a bond's yield varies from day to day depending on market conditions. To be most useful, it should give us an estimate of the rate of return an investor would earn if that investor purchased the bond today and held it for its remaining life. There are three different yield calculations: Current yield, yield to maturity, and yield to call. A bond's current yield is calculated as the annual interest payment divided by the current price. Unlike the yield to maturity or the yield to call, it does not represent the actual return that investors should expect because it does not account for the capital gain or loss that will be realized if the bond is held until it matures or is called. This yield was popular before calculators and computers came along because it was easy to calculate; however, because it can be misleading, the yield to maturity and yield to call are more relevant. The yield to maturity (YTM) is the rate of return earned on a…

Some characteristics of the determinants of nominal interest rates are listed as follows. Identify the components (determinants) and the symbols associated with each characteristic: Characteristic Component Symbol This is the premium added to the real risk-free rate to compensate for a decrease in purchasing power over time.           It is based on the bond’s rating; the higher the rating, the lower the premium added, thus lowering the interest rate.           It is calculated by adding the inflation premium to r*.           It changes over time, depending on the expected rate of return on productive assets exchanged among market participants and people’s time preferences for consumption.           As interest rates rise, bond prices fall, and as interest rates fall, bond prices rise. Because interest rate changes are uncertain, this premium is added as a compensation for this uncertainty.           This premium is added when a security lacks marketability,…

Assume that the real risk-free rate is 2% and the average annual expected inflation rate is 4%. The DRP and LP for Bond A are each 2%, and the applicable MRP is 3%. What is Bond A's interest rate?

At maturity the bond holders get back their principal. The length of time is called a. Coupon O b. Face value O c. Bond's term O d. Bond's yield

Which of the following measures the interest rate risk of a bond in dollars and cents? O Price Value of a Basis Point O Convexity O Modified Duration Duration.

The interest rate changes to i' in the second period. Evaluate the rates of return when you sell the bond after one period in the case of the change being (i) anticipated (ii) unanticipated. ? [P'

The bond shown in the following table attached pays interest annually.   a. Calculate the yield to maturity  (YTM​)for the bond.   b. What relationship exists between the coupon interest rate and yield to maturity and the par value and market value of a​ bond? Explain.