5. Suppose the General Motors Corporation issued a bond with 10 years until maturity, a face value of $1000, and a coupon rate of 7% (with annual payments). The yield to maturity on this bond when it was issued was 6% (EAR). (a). What was the price of this bond when it was issued? (b). Assuming the yield to maturity remains constant, what is the price of the bond immediately before it makes its first coupon payment?

5. Suppose the General Motors Corporation issued a bond with 10 years until maturity, a face value of $1000, and a coupon rate of 7% (with annual payments). The yield to maturity on this bond when it was issued was 6% (EAR). (a). What was the price of this bond when it was issued? (b). Assuming the yield to maturity remains constant, what is the price of the bond immediately before it makes its first coupon payment?

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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Suppose that General Motors Acceptance Corporation issued a bond with 10 years until maturity, a face value of $1,000, and a coupon rate of 7% (annual payments). The yield to maturity on this bond when it was issued was 6%. Assuming the yield to maturity remains constant, what is the price of the bond immediately before it makes its first coupon payment? Complete the steps below using cell references to given data or previous calculations. In some cases, a simple cell reference is all you need. To copy/paste a formula across a row or down a column, an absolute cell reference or a mixed cell reference may be preferred. If a specific Excel function is to be used, the directions will specify the use of that function. Do not type in mumerical data into a cell or function. Instead, make a reference to the cell in which the data is found. Make your computations only in the blue cells highlighted below. In all cases, unless otherwise directed, use the earliest appearance of the data in your…
The following table summarizes prices of various default-free zero-coupon bonds (expressed as a percentage of the face value): Maturity (years) Price (per $100 face value) 1 $96.32 a. Compute the yield to maturity for each bond. b. Plot the zero-coupon yield curve (for the first five years). c. Is the yield curve upward sloping, downward sloping, or flat? a. Compute the yield to maturity for each bond. The yield on the 1-year bond is %. (Round to two decimal places.) 2 $91.93 3 $87.36 4 5 $82.57 $77.42
Assume the zero-coupon yields on default-free securities are as summarized in the following table: (Click on the following icon in order to copy its contents into a spreadsheet.) Maturity (years) Zero-coupon YTM 1 5.00% 2 5.30% 3 5.50% 4 5 5.70% 5.80% Consider a five-year, default-free bond with annual coupons of 6% and a face value of $1,000. a. Without doing any calculations, determine whether this bond is trading at a premium or at a discount. Explain. b. What is the yield to maturity on this bond? c. If the yield to maturity on this bond increased to 6.20%, what would the new price be? a. Without doing any calculations, determine whether this bond is trading at a premium or at a discount. Explain. The bond is trading at because its yield to maturity is a weighted average of the yields of the zero-coupon bonds. (Select from the drop-down menu.)
A bond for the Chelle Corporation has the following characteristics: Maturity - 12 years Coupon - 12% Yield to maturity - 11.50% Macaulay duration - 6.73 years Convexity - 59.30 Noncallable Assume bond pays interest semiannually. Use only the data provided in the table above (in the problem statement) for your calculations. a. Calculate the approximate price change for this bond using only its duration, assuming its yield to maturity increased by 100 basis points. Do not round intermediate calculations. Round your answer to two decimal places. Use a minus sign to enter negative value, if any. Percentage change in price: % When you are dealing with large yield changes to calculate more precise bond price change -Select- v on price change. b. Calculate the approximate price change for this bond, using only duration, if its yield to maturity declined by 200 basis points. Do not round intermediate calculations. Round your answer to two decimal places. Use a minus sign to enter negative…
The following table summarizes prices of various default-free zero-coupon bonds ( $100 face value): Maturity (years) 1 2 3 4 5 {:[" Price (per "$100],[" face value) "]:} $96.33 $91.98 $87.41 $82.53 $77.41 a. Compute the yield to maturity for each bond. b. Plot the zero-coupon yield curve (for the first five years). c. Is the yield curve upward-sloping, downward-sloping, or flat? Note: Assume annual compounding. a. Compute the yield to maturity for each bond. The yield on the 1-year bond is %. (Round to two decimal places.) The yield on the 2-year bond is %. (Round to two decimal places.) The yield on the 3-year bond is %. (Round to two decimal places.) The yield on the 4-year bond is enter your response here%. (Round to two decimal places.) Part 5 The yield on the 5-year bond is enter your response here%. (Round to two decimal places.) Note:- Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism. Answer completely. You will…
Assume the zero-coupon yields on default-free securities are as summarized in the following table: in order to copy its contents into a spreadsheet.) Maturity (years) 1 2 3 4 5 Zero-coupon YTM 6.00% 6.40% 6.70% 7.10% 7.40% What is the price of a five-year, zero-coupon, default-free security with a face value of $1,000? (Click on the following icon
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?
Suppose you are given the following information about the default- free, coupon-paying yield curve: maturity (years) 1 Coupon rate (annual payments) 0% YTM 2 10% 3.000% 4.908% 3 6% 6.840% Use arbitrage to determine the yield to maturity of a two-year and three year zero-coupon bond . (express in percentages, round to whole percentage)
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Assume the zero-coupon yields on default-free securities are as summarized in the following table: (Click on the following icon in order to copy its contents into a spreadsheet.) Maturity (years) Zero-coupon YTM 1 6.70% 2 7.10% 3 7.30% 4 7.70% 5 8.00% What is the price of a three-year, default-free security with a face value of $1,000 and an annual coupon rate of 5%? What is the yield to maturity for this bond? What is the price of a three-year, default-free security with a face value of $1,000 and an annual coupon rate of 5%? The price is $ (Round to the nearest cent.)
Assume the zero-coupon yields on default-free securities are as summarized in the following table: (Click on the following icon in order to copy its contents into a spreadsheet.) Maturity (years) 1 2 3 4 5 Zero-coupon YTM 4.30% 4.70% 5.10% 5.30% 5.50% What is the price of a five-year, zero-coupon, default-free security with a face value of $1,000 Question content area bottom Part 1 The price is ___$enter your response here.(Round to the nearest cent.)
The following table summarizes yields to maturity on several 1-year, zero-coupon securities: (Click on the following icon in order to copy its contents into a spreadsheet.) Security Yield Treasury % 2.860% AAA corporate % 3.287% BBB corporate % 3.585% B corporate % 4.224% a. What is the price (expressed as a percentage of the face value) of a 1-year, zero-coupon corporate bond with a AAA-rating and a face value of ? b. What is the credit spread on AAA-rated corporate bonds? c. What is the credit spread on B-rated corporate bonds? d. How does the credit spread change with the bond rating? Why? Note: Assume annual compounding. Question content area bottom Part 1 a. What is the price (expressed as a percentage of the face value) of a 1-year, zero-coupon corporate bond with a AAA-rating and a face value of ? The price, expressed as a percentage of the face value, is enter your response here%. (Round to three decimal places.)

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