What are the Modified Duration and Macaulay Duration of the following bond? Coupon Rate = 8% (Semi-annually paid) YTM = 9% Maturity = 2 Years Par Value = 1,000 (Hint: this question is similar to Example 1 and Example 2 on slides)

What are the Modified Duration and Macaulay Duration of the following bond? Coupon Rate = 8% (Semi-annually paid) YTM = 9% Maturity = 2 Years Par Value = 1,000 (Hint: this question is similar to Example 1 and Example 2 on slides)

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

See similar textbooks

Related questions

Q: In 2021, a basketball player signed a contract reported to be worth $72.4 million. The contract was…

A: Payment for year 2021 = p1 = $10.2 millionPayment for year 2022 = p2 = $11.3 millionPayment for year…

Q: Find the APR in each of the following cases: Note: Do not round intermediate calculations and enter…

A: EAR for semi-annual compounding = 11%EAR for monthly compounding = 11.9%EAR for weekly compounding =…

Q: 1. The basic WACC equation The calculation of WACC involves calculating the weighted average of the…

A: Value of debt = $3.9 millionValue of preferred stock = $3 millionValue of common equity = $2.1…

Q: What is the future value at the end of year 3 of the following set of cash flows if the interest…

A: The objective of this question is to calculate the future value of a series of cash flows at a given…

Q: Consider the following simplified financial statements for the Yoo Corporation. Assume there are no…

A: External financing needed (EFN) represents the extra funding a company seeks to fuel its operations…

Q: Timothy is retiring from his job soon at which time his employer will make the following offer: A…

A: Annuity payments:An annuity represents a set of periodic installments made over a specified period…

Q: Pls do requirenments for a thumbs up ;)

A: a Zero coupon bondcoupon bondActual gain10.74%9.87%Predicted gain10.72%10.29% b Zero coupon…

Q: 3. Twenty years ago a XYZ stock paid a $0.10 dividend. Since then it has split two for one once and…

A: Past dividends = $0.10Current earnings = $2.50Plowback ratio = 80%ROE = 12%Beta = 1.1Risk free rate…

Q: Determine the accumulated value of semi-annual deposits of $77 each after 10 years if the deposits…

A: Accumulated principal or a series of cash flows with the compounded interest is the future value or…

Q: Your local gift shop starts a membership program for its loyal customers. Customers who have a…

A: Discount rate = 18%Average yearly spending = $500Market interest rate = 4.8%Membership card term = 9…

Q: salary in California, a $72,000 per 5. answers from Question 1 to comp

A: Given:Salary in Texas: $53,000 per yearCost of living ratio from Texas to New York: 1.392

Q: A loan of $5000 is taken out today. It is due with interest at j4 = 8% in 2 years. Instead, the…

A: NOTE:As per the policies, solving question one in case of multiple questions. Please re-upload…

Q: Explain the sources of finance.? Discuss the short term and long term sources of finance for the…

A: The objective of this question is to understand the various sources of finance available for a firm…

Q: You are given the following information: Debt tenor Account Balance b/f Repayment Balance c/f…

A: Debt sizing is a financial model using which the amount of the debt that can be raised to support an…

Q: Pat receives a series of four annual federally subsidized student loans, each for S5100 at 6.9%. To…

A: Here,Four annual federally subsidized loan is $5100 (each)Rate is 6.9%Private student loan is…

Q: Jahan deposits $9,000 into an account today that promises to earn 17.3% annually for the foreseeable…

A: To calculate the future value of Jahan's deposit after 9 years with an annual interest rate of…

Q: y is retiring from his job soon at which time his employer will make the following offer: A…

A: Present value is the equivalent today of the future cash flow based on the time value of money and…

Q: Greta has risk aversion of A = 5 when applied to return on wealth over a one-year horizon. She is…

Q: A sponsor puts $10m of equity into a project. Over a 20 year timespan, the project returns $28m in…

A: IRR is internal rate of return. It is an important capital budgeting metric. Essentially IRR is the…

Q: Jack Corporation has a profit margin of 9.70 percent, total asset turnover of 1.50, an ROF of 18.62…

A: ROE=18.62Profit margin=9.70Assets turnover=1.50How much is debt-equity ratio.

Q: at the beginning of year one, you have $100,000. Investments A and B are available. Their cash flows…

A: Cash flow is the net sum of cash and cash reciprocals moving into and out of a commerce amid a…

Q: Greta has risk aversion of A = 5 and a 1-year investment horizon. She is pondering two portfolios,…

A: To calculate Greta's capital allocation, use the Capital Market Line (CML) formula, which depends on…

Q: Calculate the total cost, total depreciation, and annual depreciation (in $) for the following…

A: Total cost = Cost + Shipping charges + Setup chargesTotal depreciation = Total cost - salvage…

Q: A tax-exempt bond was recently issued at an annual coupon rate of 10% and reaches maturity 15 years…

A: Market Price of the Bond can be determined by the calculating the present value of the cash flow or…

Q: 13Assume you plan to borrow $400,000 from your bank to buy a home. The bank offers: • a 5-year fixed…

A: Monthly payment refers to an amount that is paid every month for the repayment of a loan amount…

Q: Firm X has 6.86 percent coupon bonds on the market with 19 years to maturity. The bonds make…

A: The current yield on a bond is calculated as the annual interest payment divided by the current…

Q: 4. The interest rate on a savingsaccount is 3% . You deposit£100 today, then £100 at theend of the…

A: The objective of the question is to find the value of x that will empty the account after the final…

Q: eBook 8 Problem Walk-Through An investment will pay $100 at the end of each of the next 3 years,…

A: Number of years = 6 yearsInterest rate = 9%YearsCash flow1$1002$1003$1004$2005$4006$600

Q: Consider that you are 30 years old and have just changed to a new job. You have $91,000 in the…

A: The future worth of the amount that will be deposited today and the monthly contribution at given…

Q: At the present time, Water and Power Company (WPC) has 5-year noncallable bonds with a face value of…

A: Variables in the question:Face value=$1000Current market price=$1050.76Coupon rate=10%N=5 yearsTax…

Q: You are considering the purchase of a perpetual bond that pays you $174 per year for the foreseeable…

A: Perpetual bond is a bond which is non-redeemable and gives regular interest payments in…

Q: Lance Whittingham IV specializes in buying deep discount bonds. These represent bonds that are…

A: Par value$1,000.00Coupon rate4%YTM14%Years to maturity18Coupon payment$40.00

Q: Find the APR, or stated rate, in each of the following cases. Note: Do not round intermediate…

A: The "stated rate" refers to the interest rate that is made clear in a financial contract,…

Q: You want to create a portfolio equally as risky as the market and you have $2,000,000 to invest.…

A: An individual, institution, or entity's collection of financial assets (stocks, bonds, cash, real…

Q: Cost of Trade Credit A large retailer obtains merchandise under the credit terms of 3/10, net 35,…

A: The cost of trade credit is the annualized percentage cost to the customer of borrowing from the…

Q: a. Assuming you purchased a $50 face value bond, what is the exact rate of return you would earn if…

A: The rate of return determines the gain or loss on an investment in relation to its original cost and…

Q: What is the future value (at the end of 10 years) of an annuity that pays $700 a quarter over 10…

A: Quarterly payment$700Interest rate6.6%Number of years10 years

Q: sets and $54 thousand in rate - sensitive liabilities for the next three month period. he bank's…

A: Funding gaps indicates that how much money needed to fund the future liabilities and how much is…

Q: Which TWO of the following statements are correct when preparing consolidated financial…

A: The objective of the question is to identify the correct statements regarding the preparation of…

Q: The nominal interest rate is 8% compounded semiannually. What amount will need to be deposited every…

A: TVM refers to the concept that considers the effect of the interest-earning capacity of money, which…

Q: The most recent financial statements for Crosby, Incorporated, appear below. Sales for 2022 are…

A: Total assets=$356520Account payable=$63000Sales=$767000Net income=$74024Retained…

Q: Suppose your expectations regarding the stock price are as follows: State of the Market Boom Normal…

A: The standard deviation quantifies the level of risk associated with a stock, while the mean…

Q: (Q) You would like to purchase a home and are interested to find out how much you can borrow. When…

A: Present Value of Ordinary Annuity depicts the concept which dictates the present or today's value of…

Q: You want to have $19, 500 in 6 years for a dream vacation. If you can earn an interest rate of .2…

A: The concept of TVM refers to the interest-earning capacity of money because money earned earlier is…

Q: You annually invest $1,500 in an individual retirement account (IRA) starting at the age of 25 and…

A: Your annual investment, PMT = $ 1,500 Starting age = 25Number of Years, n = 15Annual Interest…

Q: ng annuidies. The first payment in these annuities is made at the end of Year 1, so they are…

A: Future value refers to the value of cash flow at some future date. It can be determined by…

Q: You are thinking about buying a savings bond. The bond costs $54 today and will mature in 7 years…

A: Present Value of Bond = pv = $54Time = t = 7 yearsFuture Value of Bond = fv = $108

Q: An insurance company must make payments to a customer of $10 million in one year and $5 million in…

A: Bonds speak to obligation disobedient issued by governments, enterprises, or districts as a implies…

Q: (Solving for i) In March 1963, Ironman was introduced in issue 39 of the comic book Tales of…

A: The nominal rate is the rate that is agreed upon by the borrower and lender, but it does not reflect…

Q: Interest rates have fallen. You have the opportunity to refinance your mortgage at 7% compounded…

A: NPV is net present value. It is the sum of present values of all cash flows occurring for the given…

Concept explainers

Bond Valuation

Bond valuation are the notes issued by the corporation to raise long-term funds for the business. The corporations are required to pay the interest on such liabilities at a specified rate of interest (termed as coupon rate) at specified dates which may be on semi-annual or annual basis. These interest payments may be in the form of coupons.

Question

What are the Modified Duration and Macaulay Duration of the following bond?
Coupon Rate = 8% (Semi-annually paid)
YTM = 9%
Maturity = 2 Years
Par Value = 1,000
(Hint: this question is similar to Example 1 and Example 2 on slides)
ModD = 1.886 and MacD = 1.805
ModD = 1.784 and MacD = 1.954
ModD = 1.954 and MacD = 1.784
ModD = 1.805 and MacD = 1.886

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

SEE SOLUTION Check out a sample Q&A here

Step 1: Define=Duration of bond

VIEW

Step 2: Calculate duration of bond

VIEW

Solution

VIEW

Step by step

Solved in 3 steps with 1 images

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.

Similar questions

This first table describes prevailing market interest rates. Market Data Yield 0.05 Required: Using the yield above and the information contained in the table below, please calculate the price and duration of the bond as well as all necessary steps. (Use cells A5 to B5 from the given information to complete this question.) Time Until Payment Payment Discounted Payment Weight Time × Weight 1.00 $30.00 2.00 $30.00 3.00 $30.00 4.00 $1,030.00 Price: Duration
Bonds have a maturity risk premium that can be modeled as the following:MRP = (t-1) 0.3%were t represents the years to maturity. What is the Maturity risk premium of a bond that matures in 8 years? answer in % without the symbol
Consider following characteristic of a bond Time to Maturity: 5 years Coupon Payment: Semi-ainual Coupon Rate: Par Value: YTM (in annual): 3.5% 6.2% $1,000 15. What the Macaulay's duration and modified duration for 1% yield change for this bond given the information? 国
Consider information on the following bonds (with face value 100): Bond Maturity (years) Coupon rate Yield-to-maturity А 1 0% 5.0% В 2 5% 5.5% C 3 6% 6.0% Coupons are paid annually. What is the three-year spot interest rate?
Vhat is the yield of each of the following bonds, if interest (coupon) is paid semiannually? 6% 20 8.02 % 5800.00 d of the following bond if interest (coupon) is 1 Data Table - X Years to Coupon Rate Matunty 12% 10 (Click on the following icon n in order to copy its contents into a spreadsheet.) eld of the following bond if interest (coupon) is Par Value $1,000.00 Yield to Maturity Matunty Doupon Rale 6% Price $800.00 $1,000.00 S3.110.00 $1.130.00 క Noturty 20 10 Coupon ato $1.000.00 12% 7% 20 $5,000.00 $1.000.00 7% 20 8% yield of the following bond if interest (coupon) is Yoars to Coupon Hate Print Done Maturity 00 8%
K Assume that a bond will make payments every six months as shown on the following timeline (using six-month periods): 0 2 5 Period $19.53 a. What is the maturity of the bond (in years)? b. What is the coupon rate (as a percentage)? c. What is the face value? Cash Flows View an example Get more help. ★ a. What is the maturity of the bond (in years)? The maturity is years. (Round to the nearest integer.) A 6 1 MacBook Pro & 7 $19.53 * 8 9 C 59 $19.53 60 $19.53+$1,000 Clear all BUB 0 {
Consider the following bonds: . What is the percentage change in the price of each bond if its yield to maturity falls from 6.3% to 5.3%? The price of bond A at 6.3% YTM per $100 face value is $ (Round to the nearest cent.) - X Data table (Click on the following icon g in order to copy its contents into a spreadsheet.) Bond Coupon Rate (annual payments) Maturity (years) A 0.0% 15 В 0.0% 10 3.6% 15 8.4% 10 Print Done
A bond quotes a rate of return of 5% and will pay $1,000 in one year with a probability of 42% and $0 with a probability of 58%. part A)What is the time premium? part B)What is the default premium? I need full explanation .. No plagiarism plzz
Assume the following: Bond A coupon = 6%, maturity = 5 years, yield to maturity = 6% Bond B coupon = 0%, maturity = 5 years, yield to maturity = 6% Bond C coupon = 6%, maturity = 5 years, yield to maturity = 6.5% Which of the following statements concerning duration is correct? Group of answer choices A. Duration of C<Duration of A=Duration of B. B. Duration of A>Duration of B>Duration of C. C. Duration of C < Duration of A < Duration of B. D. Duration of A< Duration of B<Duration of C.
c) Suppose you observe the following three bonds. Assume that all bonds are denominated at $100 face value per contract and that they pay their coupons annually. Price Coupon Maturity (years) Bond A 111.42 15 3 Bond B 108.33 15 Bond C 116.61 15 1 i) Compute the spot rates r0,1, r0,2 and r0,3. ii) Compute the forward rates r1,2 and r2,3.
Suppose that the prices of zero-coupon bonds with various maturities are given in the following table. The face value of each bond is $1,000. Maturity (Years) 1 2 3 4 5 Price $983.78 865.89 797.92 732.00 660.24 Required: a. Calculate the forward rate of interest for each year. b. How could you construct a 1-year forward loan beginning in year 3? c. How could you construct a 1-year forward loan beginning in year 4?
Thebond shown in the following table pays interest annually. Par value Coupon interest rate Years to maturity Current value $1,000 8% 9 $700 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.

SEE MORE QUESTIONS

Recommended textbooks for you

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

SEE MORE TEXTBOOKS