Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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1. A six-year Eurobond has a 6% coupon and 6% yield.
a)What is the modified duration if duration equals 5.20 years?
b)What is the dollar duration for this bond if its par value is $1,000?
c)What would the duration be if the annual coupon is 6% and the current yield is 10%?
d) What the duration of a Eurobond with that matures in five years, has an annual coupon of 6%, and a face value of $1,000?
2. What is the difference between book value accounting and market value accounting? What is duration and how is it useful when it comes to figuring out interest rate sensitivity? What are zero-coupon bonds and what do they allow securities firms and investors to do? What are the characteristics of consol bonds when it comes to duration and maturity?
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- What is the price of a bond with a coupon rate of 4% making semi-annual payments with a face value of $1,000 that matures in 10 years when a. the YTM on the bond is 8.6%? B. the Y IM Is 6.6%? C. the YTM is 5.0%? d. What is the relationship between YTM and price?arrow_forward4. Let R be the one-year LIBOR rate with annual compounding that will be determined in 6 years from now. Assume the forward interest rate volatility for the corresponding period is 20% per year. The risk-free rates with annual compounding are currently 5% for all maturities. a. Calculate the price of a financial derivative that pays 1000R € in 6 years from now. b. Calculate the price of a financial derivative that pays 1000R € in 7 years from now.arrow_forwardSuppose you purchase a 10-year bond with 6.3% annual coupons. You hold the bond for four years, and sell it immediately after receiving the fourth coupon. If the bond's yield to maturity was 4.6% when you purchased and sold the bond, A)What cash flows will you pay and receive from your investment in the bond per $100 face value? B)What is the annual rate of return of your investment?arrow_forward
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