Consider the characteristics of two annual pay bonds from the same issuer with the same priority in the event of default: You also observe the following spot interest rates from the current yield curve: Par value Coupons Maturity Coupon rate Yield to maturity Price Bond A $100 Annual 3 yrs 8% 10.25% 94.43 1 2 3 Bond B $100 Annual 3 yrs 4% 10.35% 84.31 Term (yrs) Spot Rates (zero coupon, %) 4% 7 10 Neither bond's price is consistent with the spot rates. Using the information in these displays, recommend either Bond A or Bond B for purchase. Justify your choice. Do not round intermediate calculations. Round your answers to the nearest cent The non-arbitrage price of Bond A: $ The non-arbitrage price of Bond B: $ -Select- appears to be the better purchase.

Explain why are the bond prices for A and B different or the same? Explain your answer clearly.

The yield on a zero-coupon bond of maturity Tis equal to: the return on the bond each period, if the bond is held until maturity the expected return on the zero-coupon bond the forward rate for time T-1 the forward rate for time T the spot rate of interest

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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.

Suppose you observe the following zero - coupon bond prices per $1 of maturity payment: 0.96154 (1-year), 0.91573 (2-year), 0.87630(3-year), 0.82270 (4- year), 0.77611 (5-year). What is the par coupon rate for the 4-year bond? Question 3 options: 3.999834% 4.488965% 4.492350 % 4.957679 % 5.144082%

The following is a list of prices for zero-coupon bonds of various maturities. Maturity (years) 1 2 3 4 Price of Bond $ 980.90 914.97 843.12 771.76 Required: a. Calculate the yield to maturity for a bond with a maturity of (i) one year; (ii) two years; (iii) three years; (iv) four years. Assume annual coupon payments. b. Calculate the forward rate for (i) the second year; (ii) the third year; (iii) the fourth year. Assume annual coupon payments. Complete this question by entering your answers in the tabs below. Required A Required B Calculate the yield to maturity for a bond with a maturity of (i) one year; (ii) two years; (iii) three years; (iv) four years. Assume annual coupon payments. Note: Do not round intermediate calculations. Round your answers to 2 decimal places. Maturity (Years) Price of Bond YTM 1 $ 980.90 % 2 $ 914.97 % 3 $ 843.12 %

Please answer 6D.

Consider the following: Price Yield to maturity Periods to maturity Modified duration Fixed-rate Bond Fixed-rate Note 107.18 5.00% 18 6.9848 100.00 5.00% 8 3.5851 a. For an increase in interest rates of 100 basis points, determine the change in value for the fixed-rate note. Show your work. b. For an increase in interest rates of 100 basis points, determine the change in value for the fixed-rate bond. Show your work. c. Which of the two fixed-rate securities are more sensitive to increases interest rates? Why? d. What would be the most appropriate course of action to take given interest rates are expected to rise? Explain carefully.

Prepare a duration table for a zero-coupon bond using the following assumptions: a. $100,000 par value b. 10-year maturity c. Discount Rate of 12%