A government bond pays coupons 11 times a year at an annual rate of 7.5%, has a face value of $1, 500, and matures in 11 years. If the current market interest rate is 8.6% compounded annually (i.e., this is an effective rate), 1. What is the periodic market interest rate? (i.e., the rate every 1 th of a year) 11 % (Give answer as a percentage to 6 decimal places) 2. What is the coupon amount paid each time? CAN (Give answer to 4 decimal places) 3. What is the current market price of the bond? EA W (Give answer to 4 decimal places)

A government bond pays coupons 11 times a year at an annual rate of 7.5%, has a face value of $1, 500, and matures in 11 years. If the current market interest rate is 8.6% compounded annually (i.e., this is an effective rate), 1. What is the periodic market interest rate? (i.e., the rate every 1 th of a year) 11 % (Give answer as a percentage to 6 decimal places) 2. What is the coupon amount paid each time? CAN (Give answer to 4 decimal places) 3. What is the current market price of the bond? EA W (Give answer to 4 decimal places)

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter8: Analysis Of Risk And Return

Section: Chapter Questions

Problem 9P

See similar textbooks

Similar questions

A 10-year government bond has face value of OR 200 and a coupon rate of 6% paid semiannually. Assume that the interest rate is equal to 8% per year. What is the bond’s price? What is the reason for the difference in price on an annual and semiannually basis? Discuss the role of financial managers.
An annual payment bond has a 10% required rate of return.Interest rates are expected to decrease 71 basis points.If the bond's duration is 12 years.what is the percentage change in bond's price?(write the answer in percentage and round it to two decimals)
Suppose a U.S. government bond promises to pay $2.249.73 three years from now. If the going interest rate on 3-year government bonds is 4%, how much is the bond worth today? PV = FV,/1 + 1N
1-year Treasury-bill rates are expected to steadily increase by 1.5 percentage per year over the next 6 years. Determine the required interest rate on a 3-year Treasury -bond and a 6-year Treasury-bond if the current 1-year interest rate is 7.5%. Assume that the Pure Expectations Hypothesis for interest rates holds.
If the interest rate on one year govt. bonds is 6.0% and the inflation rate is 2.0%, what is the real interest rate?
A 10-year government bond has a face value of £100 and an annual coupon rate of 5%. Assume that the interest rate is equal to 6% per year. (a) Calculate the bond’s present value if it pays the interest annually, and also the present value if it pays semi-annually. (b) Calculate the market price of the bond when the interest rate changes to 8% please explain it on a paper with formula, not by excel.
1) Suppose that today's one-year interest rate is 5%. Consider the following one-year interest rates expected to occur over the next four years: 6%, 7%, 8% and 9%.a. Calculate the interest rate for two-year bonds, based on the expectations theory.b. What about five-year bonds?
Suppose Home Depot issues 30-year bonds on which it pays a 4.00% (nominal) interest rate. Further, suppose that both Home Depot and the purchasers of its bonds anticipate inflation will average 2.00% during the life of the loan. Now suppose the inflation rate after the loan is made (i.e. after the bond is purchased) is actually 1.00% per annum. It follows that the actual real rate of interest is and, ceteris paribus, are (is) better off than anticipated as a result of the difference between the anticipated and the actual rate of inflation. Select one: a. 2.00%, Bondholders b. 2.00%, Home Depot O c. 3.00%, Bondholders d. 3.00%, Home Depot
Suppose a U.S. government bond will pay $1,000 three years from now. If the going interest rate on 3‐year government bonds is 4%, how much is the bond worth today?
Suppose a U.S. government bond promises to pay $3,000 three years from now. If the going interest rate on a 3-year government bond is 5%, how much is the bond worth today?
A bond pays $11,000 per year for the next 10 years. The bond costs $99,000 now. Inflation is expected to be 6 percent over the next 10 years. Answer parts (a) and (b). a. What is the current dollar internal rate of return? Use linear interpolation with x₁ = 1.95% and x₂ = 2.00% to find your answer. The current dollar internal rate of return is percent. (Type an integer or decimal rounded to two decimal places as needed.)
1. Suppose the interest rate on a one-year bond today is 6% per year, the interest rate on a one-year bond one year from now is expected to be 4% per year, and the interest rate on a one-year bond two years from now is expected to be 3% per year. The term premium on a two-year bond is 0.5% per year and the term premium on a three-year bond is 1.0 % per year. In equilibrium, what is the interest rate today on a two-year bond? On a three-year bond? What is the shape of the yield curve?