3.5 The following table gives the prices of four bonds. Bond # Bond Principal ($) 1 100 2 100 3 100 4 100 *: Half of the stated coupon is paid every six months. (a) Calculate the zero rates for maturities of 6 months, 12 months, 18 months, and 24 months. (b) What are the forward rates for the 6-month periods: months 7 to 12, months 13 to 18, months 19 to 24? (c) What are the 6-month, 12-month, 18-month, and 24-month par yields for bonds that provide semiannual coupon payments? (d) Estimate the price and yield a two-year bond providing a semiannual coupon of 7% per annum. Time to Maturity (years) 0.5 1.0 1.5 2.0 Annual Coupon ($)* 0.0 0.0 6.2 8.0 Bond Price ($) 98 95 101 104

You issued debt in the form of bonds, with a face value of $1,000, and have 9 years until maturity. The bonds have an annual coupon rate of 7.8%, which are paid semiannually. a. The current price is $1,100. What is the pretax cost of debt? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e. g 12.34.) b. The tax rate is 22%. What is the aftertax cost of debt? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 12.34.)

5. A bond is currently selling at $1,034.5. This bond has a yield-to-maturity (market interest rate) of 6.36% and a duration of 8. If the market interest rate decreases by 40 basis points, calculate the new price of the bond. 11

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An insurance company is analyzing the following three bonds, each with five years to maturity, annual interest payments, and is using duration as its measure of interest rate risk. What is the duration of each of the three bonds? (Do not round intermediate calculations. Round your answers to 2 decimal places. (e.g., 32.16)) a. $10,000 par value, coupon rate=9.7%, r 0.17 b. $10,000 par value, coupon rate 11.7%, r= 0.17 c. $10,000 par value, coupon rate = 13.7%, p=0.17 Duration of the bond years

Listen Assume that there is a bond that pays $20.00 at the and of year 2, and $105.00 at the end of year 7. It sells at a total =$(20.00+105.00). The Macauley duration of the bond is? Answer with two digits decimal accuracy. Blank Excel Worksheet Your Answer

A bond has the following terms: Principal amount $1,000 Semi-annual interest $45 Maturity 15 years a. What is the bond's price if comparable debt yields 11%? b. What would be the price if comparable debt yields 11% and the bond matures after ten years? c. What would be the bond's price in a. and b. if interest rates declined to 8 % ?