Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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(i) What is the approximate annualized yield on a 6-month Treasury bill that is sold at $95 in the primary market? If the following day investors want an annualized yield of 12% what will happen to the price of the $95 Treasury bill with 6-month left to maturity? (Face value of Treasury bill is $100) Explain your reasoning.
(ii) A 10-year Treasury bond (TBOND1) is sold on the market one day at $1000 with an annual coupon of $60. The following day good news hits the market and a new 10-year Treasury bond is sold on the market at an $50 annual coupon. What is the approximate new secondary market price of TBOND1? (Show your working in full)
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- One-year Treasury bills currently earn 1.75 percent. You expect that one year from now, 1-year Treasury bill rates will increase to 1.95 percent. If the unbiased expectations theory is correct, what should the current rate be on 2-year Treasury securities? (Round your answer to 2 decimal places.)arrow_forwardSolve this problemarrow_forwardSuppose the yield on a bond that pays $100 in one year is currently 2%. If interest rates suddenly spike so that newly issued similar 1 year $100 bonds yield 4%, the price of the original bond will fall from 98.04 to 96.15.arrow_forward
- If I buy a 2-year government bond today, how do I calculate its yield after the first year? Price is 111.58, coupon rate is 5.5, yield is .11%arrow_forwardA Treasury bill that settles on May 18, 2022, pays $100,000 on August 21, 2022. Assuming a discount rate of 5.23 percent, what are the price and bond equivalent yield? Use Excel to answer this question. Note: Round your price answer to 2 decimal places. Enter your yield answer as a percent rounded to 3 decimal places. Price Bond equivalent yield %arrow_forwardOne-year Treasury bills currently earn 5.50 percent. You expect that one year from now, one-year Treasury bill rates will increase to 5.75 percent. If the unbiased expectations theory is correct, what should the current rate be on two-year Treasury securities? 5.50% 5.625% 5.75% 11.25%arrow_forward
- Below you will find the Demand and Supply Curves for $250,000 bonds that mature in 18 years: Qd = 400,000 – 2(P) Qs = 3(P) – 100,000 What is the current market price of these bonds?arrow_forwardYou find the following Treasury bond quotes. To calculate the number of years until maturity, assume that it is currently May 2022. All of the bonds have a par value of $1,000 and pay semiannual coupons. Rate ?? 5.424 6.183 Maturity Month/Year May 32 May 35 May 41 Bid 103.4664 104.5004 ?? Asked Change 103.5392 +.3067 104.6461 ?? +.4341 +.5457 Ask Yield 6.079 ?? 4.111 In the above table, find the Treasury bond that matures In May 2035. What is your yield to maturity if you buy this bond? Note: Do not round Intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16. Yield to maturity 96arrow_forwardSuppose a ten-year, $1,000 bond with an 8.5% coupon rate and semiannual coupons is trading for $1,035.43. a. What is the bond's yield to maturity (expressed as an APR with semiannual compounding)? b. If the bond's yield to maturity changes to 9.8% APR, what will be the bond's price?arrow_forward
- If a Treasury bond has a nominal value of ¢1,100 at 15 weeks, and it can be purchased for ¢1,000, what would be the equivalent yield of the bond? Consider 365 daysarrow_forwardSuppose that a U.S. Treasury bond maturing April 30, 2020 is purchased with a settlement date of April 15, 2019. The coupon rate is 1.125%, the required yield is 1.5%. The dirty (full) price (per 100 par value) of this bond is closest to: (Hint: there are 15 days until the next coupon date and 182 days in the coupon period during which the bond is purchased) 99.614 100.130 100.646 101.678arrow_forwardSuppose the interest rate on a 1-year government bond is 3.00%, on a 4-year government bond is 3.50% and that on a 6-year government bond is 4.90%. What is the market's forecast for 2-year rates 4 years from now, assuming the pure expectations theory is correct? Show your work.arrow_forward
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