If the price of this bond decreases by $250 to $750, what will its effective interest rate be for the new buyer? If the price of this bond increases to $1200, what will its effective interest rate be for the new buyer? When bond prices go up from (a) to (b), interest rates go (up, down, nowhere). % because % because

Which bond is more sensitive to an interest rate change of 1 percent? Bond A: Yield to maturity = 4.00%, maturity = 8 years, coupon = 6% or £60, face value = £1,000. OR Bond B: Yield to maturity = 3.50%, maturity = 5 years, coupon = 7% or £70, face value = £1,000.     A.   Bond A     B.   Bond B     C.   Cannot be determined     D.   Both are equally sensitive.

Illustrate your answers by graphing bond prices versus time to LO 2 19. Interest Rate Risk Both Bond Bill and Bond Ted have 5.8 percent coupons, make semiannual payments, and are priced at par value. Bond Bill has 5 years to maturity, whereas Bond Ted has 25 years to maturity. If interest rates suddenly rise by 2 percent, what is the percentage change in the price of Bond Bill? Of Bond Ted? Both bonds have a par value of $1,000. If rates were to suddenly fall by 2 percent instead, what would the percentage change in the price of Bond Bill be then? Of Bond Ted? Illustrate your answers by graphing bond prices versus YTM. What does this problem tell you about the interest rate risk of longer-term bonds?

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i. Suppose at t = 0 you think that G - Sec 10-year maturity on - the run bond is under-priced, and you bet that its price will increase in the future. You don't have the bond in your hand, but you know there is a repo-market where you can take your position. Let the price of the bond is Rs. 97.85. Let the repo - dealer charges a hair - cut of Rs. 0.25. Say after time t = 10 days, the price of the bond becomes Rs. 98.25. Find the realized return of the bond. (Use n/360 notation). ii. What if the price reaches 98.25 after t = 180 days. Can you still make profit?

K Using the formula given below: F-P P if the market price of a $1,000-face-value discount bond changes from $925 to $950, the yield to maturity decreases by%. (Round your response to two decimal places.) Rbonds =

Which statements is INCORRECT? Treasury bonds (T-bond) have maturities up to 30 years A coupon bond is called a discount bond when its market price is less than its fair price A bond's yield to maturity (YTM) is the return an investor earns if holding the bond until its maturity Treasury bills (T-bill) have maturities up to one year

The rise and fall of a bond's price has a direct inverse relationship to its yield to maturity, or interest rate. As prices go up, the yield declines and vice versa. For example, a $1,000 bond might carry a stated annual yield, known as the coupon of 8%, meaning that it pays $80 a year to the bondholder. If that bond was bought for $870, the actual yield to maturity would be 9.2% ($80 annual interest on $870 of principal). Do you agree with this analysis? Briefly explain.

Please answer a,b

Suppose 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  ____%