QWE wishes to issue a perpetual callable bond (par value = $1,000) that pays 7.1% annual coupon. The current interest rate is 8.5%. Next year, the interest rate will be 3.6% or 8.9% with equal probability. The bond is callable at $1,064, and it will be called if the interest rate drops to 3.6%. What is the issue price of this callable bond?
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- QWE wishes to issue a perpetual callable bond that pays 7.4% annual coupon. The current interest rate is 7.4%. Next year, the interest rate will be 3.3% or 8.9% with equal probability. The bond is callable at $1,050, and it will be called if the interest rate drops to 3.3%. What is the issue price of this callable bond?You will be paying $8,600 a year In tultion expenses at the end of the next two years. Bonds currently yleld 7%. Q. What is the present value and duration of your obligation? b. What maturity zero-coupon bond would Immunize your obligation? c. Suppose you buy a zero-coupon bond with value and duration equal to your obligation. Now suppose that rates immediately Increase to 9%. What happens to your net position, that is, to the difference between the value of the bond and that of your tultion obligation? d. What if rates fall Immediately to 5% ? Complete this question by entering your answers in the tabs below. Required A Required B Required C Required D What is the present value and duration of your obligation? (Do not round intermediate calculations. Round "Present value" to 2 decimal places and "Duration" to 4 decimal places.) \table[[,,,],[Present value,,,,,],[Duration,,years,,,]]A bond is currently selling for $1040. It pays the amounts listed in the picture at the ends of the next six years. The yield of the bond is the interest rate that would make the NPV of the bond’s payments equal to the bond’s price. Use Excel’s Goal Seek tool to find the yield of the bond.
- Mobistar intends to issue callable, perpetual bonds with annual coupon payments. The bonds are callable at €12,500. One-year interest rates are 6 per cent. There is a 60 per cent probability that long-term interest rates one year from today will be 9 per cent, and a 40 per cent probability that long-term interest rates will be 4 per cent. Assume that if interest rates fall the bonds will be called. What coupon rate should the bonds have in order to sell at par value? Kindly provide explanation with your formula and calculationsYou can enter into a forward contract for a bond with a maturity in one year months that pays a coupon payment of $25 every six months. The bond has a forward price of $930. The current zero coupon rate for 6 months is 4% annually and the zero coupon risk free rate for one year is 5% annually (assume continuous compounding). The current price of the bond is $943. Use the equilibrium forward price equation (F=Sert) adjusted for both coupon payments to see if an arbitrage opportunity exists. If arbitrage is possible, explain the arbitrage opportunity that exists and show how the profit can be earned – make sure to explain every step in detail in realizing the profit and establishing the arbitrage. If arbitrage is not possible, show how you know it is not possible. ANSWER IN TYPING OTHER WISE DOWNVOTE YOUAn insurance company is thinking about purchasing bonds A and B with zero coupons to cover some of its future liabilities. The redemption periods for these zero-coupon bonds are seven and twenty years, respectively.£11 million is due in 11 years, and £14 million is due in 16 years, according to the list of its liabilities.Determine bond B's value at an effective 5% annual interest rate so that Redington's theory of immunization's first two requirements are met. (correct answer=6.419) (using formulas, no tables)
- If a bond is issued at the price of $10,000 per contract and promises a 5.7% interest every year, the contract will be redeemed by the issuer at a discount after 8 years for $9,200. If the market is offering a return of 4.8% for similar risk securities, what would be the price you are ready to offer for this bond?Lisa's new firm plans to issue a permanent callable bond with a par value of $1,000 and a nominal rate of 5% yearly. The nominal interest rate on these bonds will be 8% next year. Then a year from now, the bond's nominal interest rate will be 9% or 6% with the equal probability(50%). These bonds can be redeemed for $1350. If the bond is called when the interest rate decreases, calculate the callable bond price for today?A bond with a face value of $11,000 pays interest of 3% per year. This bond will be redeemed at par value at the end of its 13-year life, and the first interest payment is due one year from now. If you want a 10% return rate, what is the highest price that you'd be willing to pay for the bond?"
- Bond A has the following terms: (Use semi- annual interest payments if applicable.) Coupon rate of interest: 10 percent Principle: $1,000 Term to maturity: 8 years Bond B has the following terms: (Use semi- annual interest payments if applicable.) Coupon rate of interest: 5 percent Principle: $1,000 Term to maturity: 8 years What should be the price of each bond if interest rates are 10 percent? What will be the price of each bond if, after five years have elapsed, interest rates are 10 percent? What will be the price of each bond if, after eight years have elapsed, interest rates are 8 percent?You decide that you will issue floating rate bonds on 15 May 2021. The bonds have a face value of $1,000 anually semi-annual coupon payments at a rate based on BBSW plus a margin of 1.6%. The day fraction count to be Actual/365. If the BBSW is 3.1% on 15 May 2021 and 4.4% on 15 November 2021, how much interest will be payable on 15 November 2021?You are considering a 10-year, $1,000 par value bond. Its coupon rate is 9%,and interest is paid semiannually. If you require an “effective” annual interest rate (not a nominal rate) of 8.16%, how much should you be willing to pay for the bond?