National Bank has assets of $820 million with $748million with duration 12.2 and equity of $72million. Market interest rates are 6%. How would you hedge the balance sheet of this bank with T-bond futures priced are $94-12 per $100 face value (each contract $100,000 face value) for the underlying 10-year, 5% coupon bonds paying semi-annual interest? O Sell 1,277 Futures O Buy 1,277Futures

National Bank has assets of $820 million with $748million with duration 12.2 and equity of $72million. Market interest rates are 6%. How would you hedge the balance sheet of this bank with T-bond futures priced are $94-12 per $100 face value (each contract $100,000 face value) for the underlying 10-year, 5% coupon bonds paying semi-annual interest? O Sell 1,277 Futures O Buy 1,277Futures

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

See similar textbooks

Similar questions

Your firm has issued 15-year $1000 par value bonds with 8.5% annual coupon rate. If annual coupon rates on similar bonds are now 8.5%, what could you sell your bond for today assuming semi-annual compounding? O A. $990 O B. $1000 OC. $1085 O D. Sufficient information not provided.
Assume that you own a $1 million par value corporate bond that pays 7% in coupon interest (3.5% semiannual ), has 4 years remaining to maturity, and is immediately callable at par. Its current market yield is 7% and it is priced at par. If rates on comparable securities fall by more than 40 basis (0.2% semiannually), the bond will be called(a) Calculate the bonds price if the market rate increases by 50 basis (0.25% semiannually) using the present value formula from(b) Calculate the bonds effective duration assuming a 50 basis - increase or decrease in market rates
A firm has liabilities of $98 in one year, $100 in two years, and $107 in three years. The firm exactly matches its liabilities by purchasing the following zero or annual coupon bonds redeemable at par: Bond Maturity Par Value Coupon Rate Effective Yield A 1 year 100 5% 3% B 2 years 100 0% 4% C 3 years 100 4% 5% Find the number of units of Bond A that must be purchased to match the liabilities exactly. (A) 0.894 (B) 0.897 (C) 0.913 (D) 0.933 (E) 0.959
A company is going to undertake an issue of $100 million of high yield bonds, with a maturity of 5 years. The bonds are rated BB. The coupon on the bonds is 5%, paid semi-annually. The underwriter is charging a commission of 2%. What is the effective yield on the bonds, from the company's point of view? Group of answer choices 5.46 % 7.00% 5.75% 2.73%
S Suppose the following bond quotes for IOU Corporation appear in the financial page of today's newspaper. Assume the bond has a face value of $2,000 and the current date is April 19, 2021. Assume semiannual coupon payments. Company (Ticker) IOU (IOU) Coupon 5.7 Maturity April 19, 2043 Last Price 108.96 Last Yield ?? EST volume (000s) 1,827 a. What is the yield to maturity of the bond? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) b. What is the current yield? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) a. YTM b. Current yield % %
1) AzTurk Company is decided to issue 1,000 AZN par value bonds with an 12 % coupon paid semi-annually with a 5- year maturity. At the market, same type of bonds with same maturity and same risk level is trading at 1,100 AZN. Briefly explain how to calculate yield to maturity and current yield. What is the difference between yield to maturity and current yield?
A firm's bonds have a maturity of 12 years with a $1,000 face value, have an 11% semiannual coupon, are callable in 6 years at $1,209.43, and currently sell at a price of $1,365.89. What are their nominal yield to maturity and their nominal yield to call? Do not round intermediate calculations. Round your answers to two decimal places. YTM: % YTC: % What return should investors expect to earn on these bonds? I. Investors would expect the bonds to be called and to earn the YTC because the YTC is less than the YTM. II. Investors would expect the bonds to be called and to earn the YTC because the YTC is greater than the YTM. III. Investors would not expect the bonds to be called and to earn the YTM because the YTM is greater than the YTC. IV. Investors would not expect the bonds to be called and to earn the YTM because the YTM is less than the YTC.
MLK Bank has an asset portfolio that consists of $180 million of 15-year, 10.5 percent annual coupon, $1,000 bonds that sell at par. b-1. The duration of these bonds is 8.1702 years. What are the predicted bond prices in each of the four cases using the duration rule? (the cases being ± 0.10 percent and ± 2.00 percent)
You observe the following prices of Treasury securities per $100 of par value: • a 6-month T-bill sells for 96.1538 • a 1-year T-bill sells for 94.2596 • a 1.5-year 10% coupon T-bond sells for 104.9142 Assume that the pure expectations theory of the term structure holds. a.) Calculate the 6-month, 1-year, and 1.5-year spot rates on a bond-equivalent yield basis.
Questions are in photo. please show workings
A firm's bonds have a maturity of 12 years with a $1,000 face value, have an 11% semiannual coupon, are callable in 6 years at $1,211.14, and currently sell at a price of $1,370.78. What are their nominal yield to maturity and their nominal yield to call? Do not round intermediate calculations. Round your answers to two decimal places. YTM: % YTC: % What return should investors expect to earn on these bonds? Investors would not expect the bonds to be called and to earn the YTM because the YTM is greater than the YTC. Investors would not expect the bonds to be called and to earn the YTM because the YTM is less than the YTC. Investors would expect the bonds to be called and to earn the YTC because the YTC is less than the YTM. Investors would expect the bonds to be called and to earn the YTC because the YTC is greater than the YTM.
An insurance company is analyzing the following three bonds, each with five years to maturity, annual interest payments, and is using duration as its measure of interest rate risk. What is the duration of each of the three bonds? (Do not round intermediate calculations. Round your answers to 2 decimal places. (e.g., 32.16)) a. $10,000 par value, coupon rate=9.7%, r 0.17 b. $10,000 par value, coupon rate 11.7%, r= 0.17 c. $10,000 par value, coupon rate = 13.7%, p=0.17 Duration of the bond years

SEE MORE QUESTIONS

Recommended textbooks for you

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

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

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

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

SEE MORE TEXTBOOKS