A risk analyst seeks to find out the credit-linked yield spread on a BB-rated one-year coupon bond issued by a multinational mining company. If the prevailing annual risk-free rate is 3%, the default rate for BB-rated bonds is 8%, and the loss given default is 60%. You are required to calculate the yield to maturity of the bond.
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A risk analyst seeks to find out the credit-linked yield spread on a BB-rated one-year coupon bond issued by a multinational mining company. If the prevailing annual risk-free rate is 3%, the default rate for BB-rated bonds is 8%, and the loss given default is 60%. You are required to calculate the yield to maturity of the bond.
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- An investor is considering purchasing a bond with a 5.25 percent coupon interest rate, a par value of $1,000, and a market price of $926.31. The bond will mature in nine years. Based on this information, answer the following questions: a. What is the bond's current yield? b. What is the bond's approximate yield to maturity? c. What is the bond's yield to maturity using a financial calculator? ... a. The bond's current yield is 5.67%. (Round to two decimal places.) b. The bond's approximate yield to maturity is 6.30 %. (Round to two decimal places.) c. Using a financial calculator, the bond's yield to maturity is %. (Round to two decimal places.)9. Interest Rate Risk. Suppose that you are a fixed income portfolio manager at Bourbon Street Capital. You have the following bonds issued by Royal, Inc. and Chartres, LLC in your portfolio and you want to understand the risk profile of your portfolio. Given that both bonds pay semiannual coupons, answer the following questions. (Remember to convert your answer to units of full years.) Coupon Yield to maturity Maturity (years) Royal, Inc. Chartres, LLC. Bond A Bond B 9% 8% 5 $100.00 $104.055 8% 8% 2 Par $100.00 Price $100.00 (a) What is the DV01 (at current prices) for bonds A and B? (b) What are the Macaulay Durations (at current prices) for the two bonds? (c) What are the modified durations for the two bonds? (d) What is the convexity of the two bonds?Calculate the value of a bond that matures in 12 years and has a $1,000 par value. The coupon interest rate is 8 percent and the market’s required yield to maturity on a comparable – risk bond is 12 percent. How to answer this with mathematical calculation using formulas in fincance?
- The current zero-coupon yield curve for risk-free bonds is as follows: coupon, risk-free bond? . What is the price per $100 face value of a two-year, zero- The price per $100 face value of the two-year, zero-coupon, risk-free bond is $ (Round to the nearest cent.) Data table (Click on the following icon in order to copy its contents into a spreadsheet.) Maturity (years) 1 2 3 YTM 4.95% 5.49% 5.76% 4 5.97% 5 6.09% Print Done -A newly issued bond with 1 year to maturity has a price of $1,000, which equals its face value. The coupon rate is 15% and the probability of default in 1 year is 35%. The bond’s payoff in default will be 65% of its face value. a. Calculate the bond’s expected return. b. Use a data table to show the expected return as a function of the recovery percentage and the price of the bond. Please show how you got part B using all functions.Bond valuation related problems should be solved by using a financial calculator or MS excel spreadsheet. Accordingly, you must show the values of all relevant time value of money variables Findlay company recently issued bonds with a 20-year maturity, a 7.5% semiannual coupon, and a par value of $1,000. The going interest rate (kd, rd) is 6.0%, based on semiannual compounding. What is the bond's price?
- A bond is a debt investment in which an investor loans money to an entity (typically corporate or governmental) which borrows the funds for a defined period of time at a variable or fixed interest rate. Suppose the bond issued by Logan Inc. has 5-year maturity with coupon of 12%. 4.1. If the yield to maturity is 10%, compute the bond value. Compute the modified duration of this bond. Use the modified duration to estimate the change in price if the interest rate decreases by 0.50%. 4.2. 4.3.After recently receiving a bonus, you have decided to add some bonds to your investment portfolio. You have narrowed your choice down to the following bonds (assume semiannual payments): a. Using the PRICE function, calculate the intrinsic value of each bond. Is either bond currently undervalued? How much accrued interest would you have to pay for each bond? b. Using the YIELD function, calculate the yield to maturity of each bond using the current market prices. c. Calculate the duration and modified duration of each bond.d. Which bond would you rather own if you expect market rates to fall by 2% across the maturity spectrum? What if rates will rise by 2%? Why?Assume that a RMI,000 par value bond has a coupon rate of 5% and will mature in 10 years. It has a current price of RMS10.34. Given this information, answer the following questions. i) Calculate the yield of maturity of the bond. ii) Calculate the current yield of the bond. ii) Discuss why the current yield differs from the yield of maturity.
- Consider a $1,000-par-value Bond with the following characteristics: a current market price of $761, 12 years until maturity, and an 8% coupon rate. We want to determine the discount rate that sets the present value of the bond’s expected future cash-flow stream to the bond’s current market price. You are required to determine the discount rate that equates the present value of the bond?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…For an investor who plans to purchase a bond that matures in one year, the primary concern should be Select one: a. Interest rate risk b. Coupon rate risk c. Exchange rate risk d. Yield to maturity