Suppose that 6 - month, 12-month, 18 - month, 24 month, and 30 - month zero rates are 4%, 4.2%, 4.4%, 4.6%, and 4.6% per annum with continuous compounding respectively. Estimate the cash price of a bond with a face value of 100 that will mature in 30 months and pays a coupon of 6% per annum semiannually.

Suppose that 6 - month, 12-month, 18 - month, 24 month, and 30 - month zero rates are 4%, 4.2%, 4.4%, 4.6%, and 4.6% per annum with continuous compounding respectively. Estimate the cash price of a bond with a face value of 100 that will mature in 30 months and pays a coupon of 6% per annum semiannually.

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

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A ten-year bond, with par value equals $1000, pays 10% annually. If similar bonds are currently yielding 6% annually, what is the market value of the bond? Use semi-annual analysis
. Assume an organization could issue a zero-coupon bond at an annual interest rate of 4 percent with semiannual compounding for 20 years. If it receives $2,264.45 for the bond, how much would it have to pay at the maturity date? How do you solve for the semi annual payment
Suppose that the current 6-month, 1-year, 1.5-year and 2-year interest rates are 2.2%,3%, 3.5% and 3.75%, respectively. a) Calculate the prices of a 1-year and 2-year Treasury bonds. In each case, assumethe face value of £100 and the coupon rate of 5% per annum and that coupons arepaid semi-annually. Assume continuous compounding. Compare the obtainedresults. Are they consistent with your expectations? b) Calculate the par yield on the 1-year bond with semi-annual coupons
The 3-year, 5-year, and 7-year zero rates are 1%, 2%, and 3%. The rates are given per annum with annual compounding. a) What are the zero-coupon bond prices with maturities of 3 years, 5 years, and 7 years? (Assume that you receive a face value of $100 for each of these bonds on their maturity dates). b) What is the forward rate for an investment initiated 3 years from today and maturing 5 years from today? (Give your answer per annum with continuous compounding)? c) What is the forward rate for an investment initiated 3 years from today and maturing 7 years from today? (Give your answer per annum with annual compounding)?
Suppose you have a 9%, 20-year bond traded at $1,350. If it is callable in 5 years at $1,060, what is thebond’s yield to call? Interest is paid semiannually
A 1,500-bond which will mature in 10 years and with a bond rate of 15% payable annually is to be redeemed at par at the end of this period. If it is sold now for 1,390, determine the yield at this price. (I ONLY NEED THE CASH FLOW DIAGRAM PLEASSEEE DREW BELOW I )
A bond with a par value of P5,000 and with a bond rate of 9% payable annually is sold now for P5,100. If the yield is to be 12%, how much should the redemption price be at the end of 10years?
. A bond with a par value of P5,000 and with a bond rate of 9% payable annually is sold now for P5,100. If the yield is to be 12%, how much should the redemption price be at the end of 10 years?
Suppose that 6-month, 12-month, and 18-month zero rates are 5%, 5.8% and 6.4% per annum with continuous compounding, respectively. What is the cash price of a Treasury bond with a principal of $1,000 that will mature in 18months and pays coupon rate of 7% per annum semi-annually? *USE AT LEAST 6 DECIMAL PLACES $959.67 $999.78 $1,000.55 $1,007.43
The real risk-free rate of interest, r*, is 4 percent, and it is expected to remain constant over time. Inflation is expected to be 2 percent per year for the next three years, after which time inflation is expected to remain at a constant rate of 5 percent per year. The maturity risk premium is equal to 0.1(t - 1)%, where t = the bond’s maturity. What is the yield on a 10-year Treasury bond?
A bond has 10 years until maturity, a coupon rate of 8.9%, and sells for $1,110. Interest is paid annually. (Assume a face value of $1,000.) What will be the rate of return on the bond?
What is the Macaulay duration of a semi-annual bond with a coupon rate of 7 percent, five years to maturity, and a current price of $959? What is the modified duration? Duration is __. years. Modified duration is __ years.

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