Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
expand_more
expand_more
format_list_bulleted
Question
2. Consider a 15-year semiannual floating rate bond with coupon rate determined with the following formula: Coupon rate = reference rate + 65bps What’s the discount margin of the bond if the
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution
Trending nowThis is a popular solution!
Step by stepSolved in 3 steps with 8 images
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.Similar questions
- A. Calculate the yield spread of the following floating rate bond: • Annual coupon rate = reference rate + 200 basis points• initial reference rate (annual) = 4%• The bond has a 10-year of term to maturity• Assume the bond’s par value = USD1000• The price of the bond = USD1,032.84 B. Suppose the new reference rate is decreased to 3% two years after the bond is issued. What is the price of the bond then?arrow_forwardThe one-year spot rate z1 = 5% and the forward price for a one-year zero-coupon bond beginning in one year is 0.9346. Find the spot price (zero price) of a two-year zero-coupon bond.arrow_forwardA bond has the following terms: 1) $100 face value, 2) 3-year maturity and 3) 15% annual coupon rate. The bond's current yield-to-maturity is 10% per annum. Which one of the following answers is closest to the bond's duration? (Please round your calculation to the nearest 2nd decimal.) Select one: O a 2.55 years O b. 2.65 years OC 2.75 years O d. 2.85 years O e. 2.95 yearsarrow_forward
- You have decided to invest in Bond x, an n-year bond with semi-annual coupons and the following characteristics: Par value is 1000 The ratio of the semi - annual coupon rate to the desired semi- annual yield rate, is 1.03125. The present value of the redemption value is 381.5. Given v=0.5889, what is the price of bond x ? A) 1,055 B) 1,072 C ) 1,073 D) 1,069 E) 1,044arrow_forwardSuppose the interest rate on a 1-year T-bond is 5.00% and that on a 2-year T-bond is 6.40%. Assume that the pure expectations theory is NOT valid, and the MRP is zero for a 1-year T-bond but 0.40% for a 2-year bond. What is the yield on a 1-year T-bond expected to be one year from now?arrow_forwardSuppose the current price of the bond is $95, the YTM is 4%, and the duration of the bond is 9. If YTM decrease from 4% to 3.9%, approximate the change in price using duration of the bond. Price would increase by ____%arrow_forward
- What are the Modified Duration and Macaulay Duration of the following bond? Coupon Rate = 8% (Semi-annually paid) YTM = 9% Maturity = 2 Years Par Value = 1,000 (Hint: this question is similar to Example 1 and Example 2 on slides) ModD = 1.886 and MacD = 1.805 ModD = 1.784 and MacD = 1.954 ModD = 1.954 and MacD = 1.784 ModD = 1.805 and MacD = 1.886arrow_forwardWhat is the current value of a 30-year bond making semi-annual coupon payments that has a face value of $1,000 and a coupon rate of 8%, if the YTM is 4%, how much does the bond currently sell for? Does the bond sell at a discount, premium, or at face value? Reference the below formulas when solving the problem above: PV = FV / (1+r)^t FV = PV(1+r)^t FVA = PMT(((1+r)^t) -1) / r FVA = PMT((1+(r/12)^t(12))-1)/(r/12) PVA = PMT(((1-(1+r)^-t) / r)) PVA = PMT((1-(1+(r/12))^-t(12)))/(r/12) Bo = PMT ((1-(1+r/2)^-t(2))) / r/2 + FV / (1+r/2)^t(2)arrow_forward4. (i) A forward contract written on a bond has 10 months remaining until maturity. The face value of the bond is $1000, and it pays a 7% coupon every 6 months. The final coupon is due immediately prior to the maturity of the forward. The relevant riskless rate of interest is 5%. If the bond is trading at $1025, calculate the theoretical forward price and initial value of the forward contract and explain the forward pricing relationship. (ii) Provide numerical examples of arbitrage strategies for situations where a broker offers a price above, and below the theoretical forward price.arrow_forward
arrow_back_ios
arrow_forward_ios
Recommended textbooks for you
- Essentials Of InvestmentsFinanceISBN:9781260013924Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.Publisher:Mcgraw-hill Education,
- Foundations Of FinanceFinanceISBN:9780134897264Author:KEOWN, Arthur J., Martin, John D., PETTY, J. WilliamPublisher:Pearson,Fundamentals of Financial Management (MindTap Cou...FinanceISBN:9781337395250Author:Eugene F. Brigham, Joel F. HoustonPublisher:Cengage LearningCorporate Finance (The Mcgraw-hill/Irwin Series i...FinanceISBN:9780077861759Author:Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan ProfessorPublisher:McGraw-Hill Education
Essentials Of Investments
Finance
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Mcgraw-hill Education,
Foundations Of Finance
Finance
ISBN:9780134897264
Author:KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:Pearson,
Fundamentals of Financial Management (MindTap Cou...
Finance
ISBN:9781337395250
Author:Eugene F. Brigham, Joel F. Houston
Publisher:Cengage Learning
Corporate Finance (The Mcgraw-hill/Irwin Series i...
Finance
ISBN:9780077861759
Author:Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor
Publisher:McGraw-Hill Education