A bond portfolio manager has a $25 million market value bond portfollo with a six-year duration. The manager believes interest rates may increase 50 basis points, Which of the following could be used to help limit his risk? 1. 1. Sell the bonds forward. 2. II. Buy bond futures contracts. 3. IlII, Buy call options on the bonds. 4. IV. Buy put options on the bonds. O l only O Il only O l and III only O l and IV only

a. You purchased a new issue GE Corp bond. The bond has a face valueof $100, coupon interest rate of 4%, and a maturity of 10 years. Four(4) years later you sell the bond in the secondary market; however,market interest rates for bonds of equal risk and maturity are now3.5%. Calculate the selling price of your bond. b.Calculate the Annualized Holding Period Return (HPR) on thisinvestment that was held for 4 years.

Compute the price of a 5.9 percent coupon bond with 15 years left to maturity and a market interest rate of 9.6 perceL (Assume interest payments are semiannual.) (Do not round Intermedlote calculations. Round your finol answer to 2 declmal places.) Bond price Is this a discount or premium bond? O premium bond O discount bond ला here to search | 近 0 F3 F4 F5 F7 F8 F10 F11

Do not use excel, use formulas to compute the question You have two bonds, Bond A and bond B: A 3-year zero-coupon bond with face value of $1,000 with a yield-to-maturity of 4%. A 6-year bond with an annual coupon payment C (to be paid out starting a year from now), a face value of $1,000 and yield-to-maturity of 5%. Assume that compounding takes place annually.  If the price of Bond A is equal to the price of Bond B, what is the value of Bond B’s coupon payments (C)?

Suppose that a bond has an 8% coupon, a 6% YTM, and a 4% YTC and is callable in 3 years. For this bond issue, investors would expect the bonds A. Not to be called and earn the YTM B. Not to be called and earn the YTC C. To be called and earn the YTM D. To be called and earn the YTC

Consider the following two-bond portfolio of option-free bonds;                                         Bond A Bond B Years to maturity 5 years 10 years Coupon rate 5% 5% Par value 1000 1000 Yield to maturity 8% 6% Par amount owned R3,45 million R2 million Market value R30 367.59 (in 000’s) R18 528 (in 000’s) Assuming that Bond A is an option-free bond, calculate the bond’s modified duration using Macauly’s Duration.

1

The Chief Financial Officer of a company would like to raise money for new equipment by floating a new bond issue.  The CFO would like to receive $1000 (full face value) for each of the bonds she sells.  After collecting the below bond market data, and if the bonds carry a rating of A and have a term of 10 years, what coupon rate should be included in the bond contract?   Assume an annual coupon payment.      Security& Rating          Maturity Face     Coupon     Price  Treasury    1 $    1,000    0.00% $     965.00  Treasury    3 $    1,000    1.90% $     939.06  Treasury    5 $    1,000    4.30% $     932.42  Treasury   10 $    1,000    6.80% $   1,007.12  Treasury   15 $    1,000    6.60% $     908.25  CorpA  A   5  $    1,000    8.10% $     990.00  CorpB  BB  10 $    1,000    7.90% $     859.88  CorpC  AA  15 $    1,000    7.00% $     660.00