Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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Transcribed Image Text:**Title: Calculating Semi-Annual Coupon Rates for Government Bonds**
**Introduction:**
This table helps illustrate the semi-annual coupon rates of various government bonds. It provides a comparison of semi-annual coupon rates alongside other crucial bond metrics such as Yield to Maturity (YTM), face value, maturity, and price.
**Bond Data:**
1. **Bond 1:**
- **YTM:** 4.00%
- **Semi-Annual Coupon Rate:** 3.57%
- **Face Value:** 100
- **Maturity:** 10 years
- **Price:** 95
2. **Bond 2:**
- **YTM:** 4.30%
- **Semi-Annual Coupon Rate:** 4.53%
- **Face Value:** 100
- **Maturity:** 15 years
- **Price:** 105
3. **Bond 3:**
- **YTM:** 5%
- **Semi-Annual Coupon Rate:** 5.00%
- **Face Value:** 100
- **Maturity:** 25 years
- **Price:** 100
4. **Bond 4:**
- **YTM:** 6%
- **Semi-Annual Coupon Rate:** 5.96%
- **Face Value:** 100
- **Maturity:** 30 years
- **Price:** 97
**Explanation:**
The data above includes a series of bonds with varying yields to maturity and durations. The semi-annual coupon rate is highlighted, showing the interest paid every six months. Longer maturities generally allow for assessing interest rate trends and their effects on bond pricing.
**Conclusion:**
Understanding these aspects is crucial for making informed investment decisions regarding government bonds. The semi-annual coupon rate, along with the YTM, provides insight into the bond's potential returns compared to its market price and duration.
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- esc If 1 2 3 4 5 6 7 8 10 11 13 14 16 19 1. Find the Yield to Maturity (YTM) for the following government bonds Price Semi-ann Face valu Maturity YTM YTM Semi-ann Face valu Maturity Price YTM Semi-ann Face valu Maturity E 99.83 2.25% 100 3 2.31% ? 2.64% 2.38% 100 4 Q 2. Based on the following YTM for the various maturities, what price are these government bonds trading at? -$99.02 4.00% 3.57% 100 Type here to search Sheet1 f2 Price Semi-ann Face valu Maturity YTM a 3. What is the semi-annual coupon rate on the following government bonds? 2 YTM Semi-ann Face valu Maturity Price YTM Semi-ann Face valu Maturity W f3 # 98.45 2.50% 100 * 2.61% 3 2.17% 2% 100 2 4.30% 100 15 f4 Price Semi-ann Face valu Maturity YTM $ T YTM Semi-ann Face valu Maturity Price YTM Semi-ann Face valu Maturity 99.25 2.75% 100 10 2.84% f5 3% 5.50% 100 20 -$137.39 olo 5% 100 LO 5 TE Price Semi-ann Face valu Maturity YTM f6 YTM Semi-ann Face valu Maturity 97.59 3% 100 30 3.12% 17 6% 5.96% 100 30 hp &arrow_forwardWhat is the coupon rate of a ten-year, $10,000 bond with semiannual coupons and a price of $9,558.57, if it has a yield to maturity of 6.6%? OA. 7.188% OB. 5.99% OC. 4.792% OD. 8.386%arrow_forwardSunnyfax Publishing pays out all its earnings and has a share price of $37.00. In order to expand, Sunnyfax Publishing decides to cut its dividend from $3.00 to $2.00 per share and reinvest the retained funds. Once the funds are reinvested, they are expected to grow at a rate of 14%. If the reinvestment does not affect Sunnyfax's equity cost of capital, what is the expected share price as a consequence of this decision? O$45.87 $40.14 $68.81 $57.34arrow_forward
- 4. Compute the four-year spot rate using the information below about two 4-year annual coupon bonds: Face value Face value Price Bond I Bond II $800 5% $575 $1,000 6% $723arrow_forwardWhat is the coupon rate if a two-year $10,000 bond with semiannual coupons and a price $9636.67 if it has a yield to maturity of 6.9%? a. 5.909% b. 6.894% c. 4.924% d. 3.939%arrow_forwardWhich of the following bonds will have the larger price change (dollar value) for a 75- basis point change in yield? A. A $120 dollar bond with duration 2.25 B. A $70 dollar bond with duration 3.25 C. A $160 dollar bond with duration 1.75 D. A $200 dollar bond with duration 1.25 E. A $300 dollar bond with duration 0.75arrow_forward
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