Consider a portfolio of a 1-year zero coupon bond with face value 2,000 and a 10-year zero coupon bond with face value 6,000. The yield on all bonds is 10% per annum (continuous). The duration (in years) of this bond portfolio is (a) 3.25 (b) 5.00 (c) 5.95 (d) 6.20 (e) 7.75
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Consider a portfolio of a 1-year zero coupon bond with face value 2,000 and a 10-year zero coupon bond with face value 6,000. The yield on all bonds is 10% per annum (continuous). The duration (in years) of this bond portfolio is (a) 3.25 (b) 5.00 (c) 5.95 (d) 6.20 (e) 7.75
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- Suppose a 10-year, 10% semiannual coupon bond with a par value of 1,000 is currently selling for 1,135.90, producing a nominal yield to maturity of 8%. However, the bond can be called after 5 years for a price of 1,050. (1) What is the bonds nominal yield to call (YTC)? (2) If you bought this bond, do you think you would be more likely to earn the YTM or the YTC? Why?Consider a coupon bond with an 8% annual coupon rate, a 10% interest rate, and a$1000 face value. The bond will mature in 4 years. What is the duration of this bond? Duration isdefined as a weighted average of the maturities of the cash payments. Suppose the weightassigned to the maturity of 1 year is W. Show your work A: Duration=2.28 and W=7.77%B: Duration=3.56 and W=20.5%C. Duration=3.56 and W=23.1%D. Duration=3.56 and W=7.77%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.
- Suppose that a bond with an 8% coupon rate and semiannual coupons has a face value of $1,000, 10 years to maturity. The required rate (Yield to Maturity, YTM) is 5%. Draw a timeline to identify the amount and timing of cash flows obtained with the bond and calculate the bond value. Redo part (a) if YTM is 10%. Next, use the results of parts (a) and (b) to show the relationship among YTM, coupon rate and bond value.Portfolio A consists of a 1-year zero-coupon bond with a face value of $1,000 and a 10-year zero coupon bond with a face value of $1,000. Portfolio B consists of a single zero coupon bond with a face value of $2,000 and 3.6 years remaining to maturity. The current yield on all bonds is 10% per annum. Show that both portfolios have the same duration (start with B then do A). Show that the percentage changes in the values of the two portfolios for a 0.1% per annum drop in yields are virtually the same.Portfolio A consists of a 6-year zero-coupon bond with a face value of $6,000 and a 11-year zero-coupon bond with a face value of $4,000. The current yield on all bonds is 4.75% per annum. (Answer with two decimal digits accuracy) The duration of portfolio A is Your Answer: Answer
- Consider the following bonds: 3-year zero coupon bond with a face value of £100 (Bond A), a semi-annual 6% coupon bond with a face value of £100 and a maturity of 4 years (Bond B) a semi-annual 5% bond with a maturity of 2 years and a face value of £100 (Bond C). Assume that the required yield is 4% per annum across all maturities. Calculate the prices of all three bonds. Calculate the duration of all three Calculate the convexity of all three If an investor owns one thousand of the 3-year zero coupon bonds, calculate how much of each of the other bonds should be held to make the portfolio immune to small parallel shifts in required yields using the durations and convexities of theSuppose you are reviewing a sheet for a bond portfolio and see the following information. These bonds have a par value of 100 and make semiannual coupon payments. Bond Annual coupon rate Number of years Annual yield to maturity A B с 6% 8% 10% 2 3 5 5% 10% 8% What is the bond portfolio's yield to maturity based on the IRR calculation?6) Consider a 2-year coupon bond with a face value of $1,000, a coupon rate of 6% per annum payable semiannually and a nominal required yield of 9% per annum compounded semiannually. Find the Macaulay duration and the modified duration for this bond.
- Suppose a 10-year, $1,000 bond with an 8.0% coupon rate and semi-annual coupons is trading for a price of $1,034.74. a. What is the bond's yield to maturity (expressed as an APR with semi-annual compounding)? b. If the bond's yield to maturity changes to 9.0% APR, what will the bond's price be? a. What is the bond's yield to maturity (expressed as an APR with semi-annual compounding)? The bond's yield to maturity is %. (Round to two decimal places.)Bond A is a 4-year bond with a 10% coupon rate and Bond B is a 2-year bond with a 20% coupon rate. Both bonds have a face value of £100, and all coupons are paid annually, starting in year 1. Consider a portfolio that consists of one unit of Bond A and one unit of Bond B. The yield curve is flat at ? = 5%. Compute the approximate percentage change in the value of the portfolio if the interest rate increases by 200 basis points.Consider a 10-year bond with current price of $98.4 and a duration of 9.1 years. Suppose the yield on the bond is 9.6% per year with continuous compounding. What is the predicted change in the price (in dollars) of the bond if the yield increases by 0.4%? (required precision: 0.01 +/- 0.01)