Calculate and interpret the Macaulay and modified durations of a a) 3-year 10% semi-annual bond (Bond C) when the required yield is 10%, and a b) 3-year zero-coupon bond (Bond D) when the required yield is 10%
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- Prepare a duration table for a coupon bond using the following assumptions: a. $100,000 par value b. 7% coupon rate c. 10-year maturity d. Annual interest payments e. Discount rate of 12%(3) Use a 1 bps shock to compute duration and convexity (using approximating measures for duration and convexity, respectively) for the following bond as of the origination date. Origination Date Maturity Date 12/31/2021 12/31/2023 $100 Par Value Annual Coupon Rate 2.00% Рayment frequenсy Quarterly Assume the applicable zero rates for this bond are the following on 12/31/2021 Date Zero rate 12/31/2021 3/31/2022 0.18% 6/30/2022 9/30/2022 0.42% 0.64% 12/31/2022 0.84% 3/31/2023 6/30/2023 9/30/2023 12/31/2023 1.06% 1.24% 1.35% 1.42%Calculating Actual YTM Using Linear Approximation Face Value per Bond (par value) Closing Price of bond on 12/26/2021 Coupon Rate Frequency of Coupon Payments Next Coupon Payment Date Maturity Date Current Date Days Remaining to Maturtity Years Remaining to Maturity Number of Cashflow per year Number of Casflows till Maturity Value of Semi-Annual Coupons Payable £ Actual YTM Market Value of the Bond £ 1,000 138.30 5.875% 6 months 6/13/2022 12/11/2031 12/26/2021 3637 9.96 19.93 29.38 Calculate the Actual YTM and Market value of the bond Using Linear Approximation. You must clearly explain the steps involved and present the linear equation. Assume that the market price of the bond is the clean price.
- Q) A $14,149 par value bond whose coupon rate is 4.3% is purchased. If the investment represents a current yield of 4.5%, compute the bond's market price at the time of the purchase.The following information relates to a forward contract written on a bond: Bond price = $95 Maturity = 1 year Coupon 1, paid in 6 months = $3; Coupon 2, paid immediately prior to maturity of forward = $2 Riskless rate of interest = 5% What is the forward price? A) $94.43 B $85.77 c) $94.79 D) $93.79Consider following characteristic of a bond Time to Maturity: 5 years Coupon Payment: Semi-ainual Coupon Rate: Par Value: YTM (in annual): 3.5% 6.2% $1,000 15. What the Macaulay's duration and modified duration for 1% yield change for this bond given the information? 国
- Q) A $14,149 par value bond whose coupon rate is 4.3% is purchased. If the investment represents a current yield of 4.5%, compute the bond's market price at the time of the purchase. Solve it earlyConsider the following risk-free bonds available for sale in the bond market (assume annual +Coupons). Bond's maturity Ask Price (per $100 of Coupon rate (in %) face value 1-year bond 100.0040 0.125% 2-year bond 101.2100 2% 3-year bond 101.2140 1.625% Construct the term structure of interest rates for these three periods. b. Your company plans to issue three-year maturity coupon bonds. Based on its excellent credit rating, your company pays a low constant 3% risk premium over the relevant term-structure rates. You plan to issue bonds priced at par (i.e. price = face value). At what level should you plan to set the coupon on your bond to justify this price? c. Now assume that your company wishes to issue 3-year zero coupon bonds. At what price will these bonds sell?Question 1. Duration and Banking Consider a 5-year bond with annual coupon payments. The bond has a face value (prin- cipal) of $100 and sells for $95. Its coupon rate is 3%. (The coupon rate is the ratio between the coupon value and the face value). The face value is paid at the maturity year in addition to the last coupon payment. 1. Calculate the bond's yield to maturity (YTM) and duration using its YTM. 2. Suppose the bond's YTM changes in the same way as a 5-year T-bill interest rate. Use the bond's modified duration to evaluate the relative change in the 5-year bond's value if the interest rate on 5-year T-bills falls by one basis point, that is, by 0.0001. This part was extracted from the balance sheet of the First Bank of Australia: Assets (Billion AUD) Bond 80 Liabilities (Billion AUD) Fixed-rate liabilities 60 where "Bond" here refers to the bond we specified above and the fixed-rate liabilities (banks future payment obligations) have an average duration of 4 years and YTM of…
- Vhat is the yield of each of the following bonds, if interest (coupon) is paid semiannually? 6% 20 8.02 % 5800.00 d of the following bond if interest (coupon) is 1 Data Table - X Years to Coupon Rate Matunty 12% 10 (Click on the following icon n in order to copy its contents into a spreadsheet.) eld of the following bond if interest (coupon) is Par Value $1,000.00 Yield to Maturity Matunty Doupon Rale 6% Price $800.00 $1,000.00 S3.110.00 $1.130.00 క Noturty 20 10 Coupon ato $1.000.00 12% 7% 20 $5,000.00 $1.000.00 7% 20 8% yield of the following bond if interest (coupon) is Yoars to Coupon Hate Print Done Maturity 00 8%Compute yield-to-maturity for the following zero-coupon bonds: 1-year zero-coupon bond, traded currently at 980 dollars 2-years zero-coupon bond, traded currently at 920 dollars 3-years zero-coupon bond, traded currently at 840 dollars Assume that all 3 bonds have the same nominal: 1000 dollars. Using YTMs calculated plot the yield curve.Problem: You are given the following data for two bonds with semiannual payments (A and B) Bond Settlement Date B 2/15/2020 2/15/2020 Maturity Date Coupon rate 2/15/2040 2/15/2040 4% 8% Similar bonds with 20 year to maturity sell for 9% coupon rates in the market. a) Calculate the bond value for bond A and B b) Calculate the YTM for bond A and B Bond Valuation Settlement Date 2/15/2020 2/15/2020 Maturity Date Coupon rate Required return Redemption Value Frequency Basis Calculate the PV of the bond in U.S. S 2/15/2040 2/15/2040 8% 4% 4.50% 4.50% 100 100 2 a) Use the Price Function B) Use the Yield Function