ou are considering invesring in either a 10 year bond with a 4% cupon and a 6 year bond witha 8% cupon. Assume that both bods have equal credit risk and assume that your goal is to increase the value of your investments. If you expect a

Suppose today you buy a coupon bond that you plan to sell one year later. Which of the rate of return formula incorporates future changes into the bond's price?

You believe that stocks are overvalued so you elect to add bonds to your retirement plan to reduce future potential downside price risk. With cash you've received from the sale of equities, you target two bonds for purchase. What is the fair market value for each of these bonds if the YTM for both is 6.75%? First bond: What is the price of an 8-year 4.95% coupon bond with $1,000 face value paying coupons semiannually? $944.28 $908.15 $890.12 $1,117.72 $875.36

An investment firm recommends that a client invest in bonds rated AAA, A, and B. The average yield on AAA bonds is 4%, on A bonds 5%, and on B bonds 8%. The client wants to invest twice as much in AAA bonds as in B bonds. How much should be invested in each ype of bond if the total investment is $9,000, and the investor wants an annual return of $470 on the three investments? The client should invest $ in AAA bonds, $in A bonds, and $[ in B bonds.

You plan to buy an 8% coupon 8-year maturity bond when market rate of return of similar bond is 10%. a) Calculate the proper price for this bond. b) TWO years later, the market rate has changed to 9% and the price of your bond has also changed accordingly. If you sell this bond at the market price, what is the ANNUAL rate of return from your investment in this bond? c) What will be your real rate of return over the two years if inflation rate is 3% in the first year and 5% in the second?

Please correct answer and don't use hand rating

Calculate YTC using a financial calculator by entering the number of payment periods until call for N, the price of the bond for PV, the interest payments for PMT, and the call price for FV. Then you can solve for 1/YR YTC. Again, remember you need to make the appropriate adjustments for a semiannual bond and realize that the calculated 1/YR is on a periodic basis so you will need to multiply the rate by 2 to obtain the annual rate. In addition, you need to make sure that the signs for PMT and FV are identical and the opposite sign is used for PV; otherwise, your answer will be incorrect. A company is more likely to call its bonds if they are able to replace their current high-coupon debt with less expensive financing. A bond is more likely to be called if its price is above par-because this means that the going market interest rate is less than its coupon rate. Quantitative Problem: Ace Products has a bond issue outstanding with 15 years remaining to maturity, a coupon rate of 8.4%…

9. Interest Rate Risk. Suppose that you are a fixed income portfolio manager at Bourbon Street Capital. You have the following bonds issued by Royal, Inc. and Chartres, LLC in your portfolio and you want to understand the risk profile of your portfolio. Given that both bonds pay semiannual coupons, answer the following questions. (Remember to convert your answer to units of full years.) Coupon Yield to maturity Maturity (years) Royal, Inc. Chartres, LLC. Bond A Bond B 9% 8% 5 $100.00 $104.055 8% 8% 2 Par $100.00 Price $100.00 (a) What is the DV01 (at current prices) for bonds A and B? (b) What are the Macaulay Durations (at current prices) for the two bonds? (c) What are the modified durations for the two bonds? (d) What is the convexity of the two bonds?

Assume that the Pure Expectations Theory of the term structure is correct. Also assume that the interest rate today on a 9-year security is 6.40%, while the interest rate today on a 15-year security is 8.00%. Finally assume that the interest rate on a 3-year security to be bought at Year 9 and held over Years 10, 11, and 12 is 6.80%. Given this information, determine the average annual return that investors today must expect that they will receive from investing in a 3-year security in 12 Years (that is, buying the security at Year 12 and holding it over Years 13, 14, and 15). O 13.00% O 12.50% 13.50% O 12.00% O 14.00%

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?