Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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Both Bond Bill and Bond Ted have 9.4 percent coupons, make semiannual payments, and are priced at par value. Bond Bill has 5 years to maturity, whereas Bond Ted has 22 years to maturity. Both bonds have a par value of 1,000. |
a. |
If interest rates suddenly rise by 2 percent, what is the percentage change in the price of these bonds? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) |
b. | If rates were to suddenly fall by 2 percent instead, what would be the percentage change in the price of these bonds? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) |
Bond Bill Bond ted
a percentage in change
b percentage in change
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- need help on both questions , thank youarrow_forward51. whats wrong ?arrow_forwardToday, interest rates on 1-year T-bonds yield 1.7%, interest rates on 2-year T-bonds yield 2.5%, and interest rates on 3-year T-bonds yield 3.7%.a. If the pure expectations theory is correct, what is the yield on 1-year T-bonds one year from now? Be sure to use a geometric average in your calculations. Do not round intermediate calculations. Round your answer to four decimal places. b. If the pure expectations theory is correct, what is the yield on 2-year T-bonds one year from now? Be sure to use a geometric average in your calculations. Do not round intermediate calculations. Round your answer to four decimal places. c. If the pure expectations theory is correct, what is the yield on 1-year T-bonds two years from now? Be sure to use a geometric average in your calculations. Do not round intermediate calculations. Round your answer to four decimal places.arrow_forward
- An insurance company must make payments to a customer of $10 million in one year and $5 million in five years. The yield curve is flat at 10%. Required: a. If it wants to fully fund and immunize its obligation to this customer with a single issue of a zero-coupon bond, what maturity bond must it purchase? Note: Do not round intermediate calculations. Round your answer to 2 decimal places. b. What must be the face value and market value of that zero-coupon bond? Note: Do not round intermediate calculations. Enter your answers in millions rounded to 2 decimal places. a. Maturity of zero coupon bond b. Face value b. Market value years million millionarrow_forwardSuppose the current interest rate on a one-year bond is 2% and the current interest rate on a two-year bond is 4%. The term premium on a two-year bond is 1%. According to the expectations hypothesis, what interest rate should we expect on a one-year bond next year? Answer as a percentage to one decimal place and do not include symbols (e.g. $, %, commas) in your answer. Answer:arrow_forwardCompute the price of a 6.1 percent coupon bond with 15 years left to maturity and a market interest rate of 9.0 percent. (Assume interest payments are semiannual.) (Do not round intermediate calculations. Round your final answer to 2 decimal places.) Is this a discount or premium bond?arrow_forward
- Bond RTY.AF has a 5 percent coupon, makes semiannual payments, currently has 19 years remaining to maturity, and is currently priced at par value. If interest rates suddenly rise by 2 percent, what is the percentage change in the price of Bond RTY.AF? Be sure to include the sign, especially if the bond price falls and the percentage change is negative. (Do not include the percent sign (%). Enter rounded answer as directed, but do not use the rounded numbers in intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).)arrow_forwardYour investments are earning 4% per annum compounded annually. You would like to compare this to the yield on bonds which are quoted on a compounded semi-annual basis. What is the equivalent return that you are earning per annum on a compounded semi-annual basis? (Do not round intermediate calculations. Report your result as a percentage. Round the final answers to 2 decimal places. Omit the % sign in your response. For example, if your answer is 3.21%, just enter 3.21) Numeric Responsearrow_forwardA 6.45 percent coupon bond with 24 years left to maturity is priced to offer a 5.7 percent yield to maturity. You believe that in one year, the yield to maturity will be 6.2 percent. What would be the total return of the bond in dollars? (Assume interest payments are semiannual.) (Negative amount should be indicated by a minus sign. Do not round intermediate calculations. Round your final answer to 2 decimal places.) Answer is complete but not entirely correct. Total return $ 2.64 × What would be the total return of the bond in percent? (Assume interest payments are semiannual.) (Negative answer should be indicated by a minus sign. Do not round intermediate calculations. Round your final answer to 2 decimal places.) Answer is complete but not entirely correct. Total return 0.14%arrow_forward
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