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- (Related to Checkpoint 9.4) (Bond valuation) A bond that matures in 8 years has a $1,000 par value. The annual coupon interest rate is 13 percent and the market's required yield to maturity on a comparable-risk bond is 16 percent. What would be the value of this bond if it paid interest annually? What would be the value of this bond if it paid interest semiannually? Question content area bottom Part 1 a. The value of this bond if it paid interest annually would be $enter your response here. (Round to the nearest cent.) Part 2 b. The value of this bond if it paid interest semiannually would be $enter your response here. (Round to the nearest cent.)Q4: Consider a bond paying a coupon rate of 10% per year semi-annually when the market interest rate is only 4% per half-year. The bond has three years until maturity. This initial payment is $1000. A: What is find the bond’s price today and 6 months time after the next coupon is paid?A6 Calculate the interest rate sensitivity (change in price with respect to the interest rate) of a 1 year and a 5 year bond paying coupons of 4% when the current interest rate is 2%.
- According to the expectations theory, what will be the interest rate on a three-year bond if the two-year term premium is 1.0% while the three-year term premium is 2.0%, and a one-year bond has an interest rate of 4% and is expected to have an interest rate of 5% next year and 6% in two year? Select one: Oa. 6.0% O b. 15.0% Oc. 5.0% O d. 4.0%Question 1. Duration and Banking Consider a 5-year bond with annual coupon payments. The bond has a face value (prin- cipal) of $100 and sells for $95. Its coupon rate is 3%. (The coupon rate is the ratio between the coupon value and the face value). The face value is paid at the maturity year in addition to the last coupon payment. 1. Calculate the bond's yield to maturity (YTM) and duration using its YTM. 2. Suppose the bond's YTM changes in the same way as a 5-year T-bill interest rate. Use the bond's modified duration to evaluate the relative change in the 5-year bond's value if the interest rate on 5-year T-bills falls by one basis point, that is, by 0.0001. This part was extracted from the balance sheet of the First Bank of Australia: Assets (Billion AUD) Bond 80 Liabilities (Billion AUD) Fixed-rate liabilities 60 where "Bond" here refers to the bond we specified above and the fixed-rate liabilities (banks future payment obligations) have an average duration of 4 years and YTM of…According to the expectations theory, what will be the interest rate on a three-year bond if the two-year term permum is 1.0% while the three year term premium is 2.0%, and a one-year bond has an interest rate of 4% and is expected in have an interest rate of 5% next year and 6% in two year ? Select one: A. 5.0% B. 15.0% C. 4.09 D. 6.0%
- Suppose the current one-year interest rate is 3%. Also assume that financial markets expect the one-year interest rate next year to be 4%, and expect the one-year rate to be 5% the year after that. Given this information, the yield to maturity on a three-year bond will be approximately 15% OA. 5% В. Ос. 6% 12% O D. O E 4%A one-year bond currently pays 6% interest. It's expected that it will pay 11.0% next year and 10% the following year. The two-year term premium is 0.4% while the three-year term premium is 0.7%. What is the interest rate on a three-year bond according to the liquidity premium theory? Select one: a. 10.1% b. 9.70A O c.9.0% O d. 9.40%Suppose that the prices of zero-coupon bonds with various maturities are given in the following table. The face value of each bond is $1,000. Maturity (Years) 1 2 3 4 5 Price $983.78 865.89 797.92 732.00 660.24 Required: a. Calculate the forward rate of interest for each year. b. How could you construct a 1-year forward loan beginning in year 3? c. How could you construct a 1-year forward loan beginning in year 4?
- You observe the following term structure: Effective Annual YTM 1-year zero-coupon bond 8.1% 2-year zero-coupon bond 8.2 3-year zero-coupon bond 8.3 4-year zero-coupon bond 8.4 Required: If you believe that the term structure next year will be the same as today’s, calculate the return on (i) the 1-year zero and (ii) the 4-year zero. Which bond provides a greater expected 1-year return?Suppose that the prices of zero-coupon bonds with various maturities are given in the following table. The face value of each bond is $1,000. Maturity (Years) 1 2 3 4 5 Required: a. Calculate the forward rate of interest for each year. b. How could you construct a 1-year forward loan beginning in year 3? c. How could you construct a 1-year forward loan beginning in year 4? Required A Price $940.93 Complete this question by entering your answers in the tabs below. 868.39 800.92 735.40 670.48 Required B Maturity (years) 2 3 Calculate the forward rate of interest for each year. Note: Round your answers to 2 decimal places. Required C Forward Rate % % Prov 12 of 12 NextK Assume that a bond will make payments every six months as shown on the following timeline (using six-month periods): 0 2 5 Period $19.53 a. What is the maturity of the bond (in years)? b. What is the coupon rate (as a percentage)? c. What is the face value? Cash Flows View an example Get more help. ★ a. What is the maturity of the bond (in years)? The maturity is years. (Round to the nearest integer.) A 6 1 MacBook Pro & 7 $19.53 * 8 9 C 59 $19.53 60 $19.53+$1,000 Clear all BUB 0 {