2. Dhofar company issued bonds with 500 $ face value and 10 percent annual coupon rate The current yield to maturity on this bond is 5 percent and maturity date in 6 years. The current market price is 626.89.Calculate the expected change in the bond price if the yield to maturity is expected to decrease by 0.12 percent and the modified duration of this bond is 4.69.

2. Dhofar company issued bonds with 500 $ face value and 10 percent annual coupon rate The current yield to maturity on this bond is 5 percent and maturity date in 6 years. The current market price is 626.89.Calculate the expected change in the bond price if the yield to maturity is expected to decrease by 0.12 percent and the modified duration of this bond is 4.69.

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

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"A Company has a bond outstanding with a face value of $1000 that reaches maturity in 4 years. The bond certificate indicates that the stated coupon rate for this bond is 2.9% and that the coupon payments are to be made semiannually. Assuming the appropriate YTM on the bond is 6%, then the price that this bond trades for will be closest to__________.
The duration of a bond is 5.4. The convexity is calculated by a 20-year bond that has an effective yield of 7% and a price of 103.10. If the bond’s yield falls to 6.5% then the price increases to 103.51. If the bond’s yield increase to 7.5% then the price decreases to 102.94. Calculate the estimated new price of the bond if it increases by 50 basis points.
You have the following information regarding the bond ABC. Semiannual $25 payments YTM 8% Maturity (in 4. years) Par value $1,000 Let's assume the modified duration of this bond is 4. Based on this assumption and using the modified duration, estimate the price of the bond after a 65-basis-point decrease in interest rates.
A Treasury bond that matures in 10 years has a yield of 4.75%. A 10-year corporate bond has a yield of 9.25%. Assume that the liquidity premium on the corporate bond is 0.60%. What is the default risk premium on the corporate bond? Round your answer to two decimal places. %
Last year Carson Industries issued a 10-year, 13% semiannual coupon bond at its par value of $1,000. Currently, the bond can be called in 6 years at a price of $1,065 and it sells for $1,200. a. What are the bond's nominal yield to maturity and its nominal yield to call? Do not round intermediate calculations. Round your answers to two decimal places. YTM: % YTC: % Would an investor be more likely to earn the YTM or the YTC? -Select- b. What is the current yield? (Hint: Refer to Footnote 6 for the definition of the current yield and to Table 7.1) Round your answer to two decimal places. % Is this yield affected by whether the bond is likely to be called? I. If the bond is called, the capital gains yield will remain the same but the current yield will be different. II. If the bond is called, the current yield and the capital gains yield will both be different. III. If the bond is called, the current yield and the capital gains yield will remain the same but the coupon rate will be…
The face Value of the 8.5% bond is $1,000 with a maturity period of 5 years. The bond is selling currently at $943:15: The yield-to maturity on the similar bond-is 10%. Calculate Bond Duration and Volatility of the Bond
Ordinary bonds issued by PIMCO have a current quoted price of $830.50. The PIMCO bond has a 5.7% annual coupon rate. The YTM = 8.15% and the PIMCO bonds pays coupon twice per year. If the next coupon will be disbursed in exactly 6 months, the PIMCO bond will mature in: a. 5.19 years b. 29.14 years c. 19.96 years d. 20.77 years e. 10.39 years
a treasury bond that matures in 10 years has a yield of 6.75%. a 10 year corporate bond has a yield of 9.50%. assume that the liquidity premium on the corporate bond is 0.35%. What is the default risk premium on the corporate bond?
A bond, paying semi-annual coupons of $42, is purchased at a discount to yield j2 9%. The book value adjustment in the 8th coupon period is $8.07. What is the purchase price of this bond?
You are given the following prices of zero coupon bonds per $1.00 of maturity value: Term in years 1 2 3 4 Zero-coupon bond prices 0.9852 0.9701 0.9546 0.9388 Determine the one-year forward rate for year 4 (ie, the one-year forward rate deferred for 3 years. a) 1.629% b) 1.526% c) 1.572% d) 1.729% e) 1.683%
Find the Macaulay duration and the modified duration of a 15-year, 7.5% corporate bond priced to yield 5.5%. According to the modified duration of this bond, how much of a price change would this bond incur if market yields rose to 6.5%? Using annual compounding, calculate the price of this bond in one year if rates do rise to 6.5%. How does this price change compare to that predicted by the modified duration? Explain the difference.
Use the method of averages to find the approximate yield rate for the bond with the following characteristics: Face value = $19,000 Bond rate payable semi-annually = 7% Time before redemption: 5 years Market quotation = 97.375 NOTE: The bond is to be redeemed at par.

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