Suppose that a 1-year zero-coupon bond with face value $100 currently sells at $95.11, while a 2-year zero sells at $79.52. You are considering the purchase of a 2-year-maturity bond making annual coupon payments. The face value of the bond is $100, and the coupon rate is 11% per year. a. What is the yield to maturity of the 2-year zero?(Do not round intermediate calculations. Round your answers to 3 decimal places.) Yield to Maturity 2-year zero % b. What is the yield to maturity of the 2-year coupon bond? (Do not round intermediate calculations. Round your answers to 3 decimal places.) Yield to Maturity 2-year coupon bond

Suppose that a 1-year zero-coupon bond with face value $100 currently sells at $95.11, while a 2-year zero sells at $79.52. You are considering the purchase of a 2-year-maturity bond making annual coupon payments. The face value of the bond is $100, and the coupon rate is 11% per year. a. What is the yield to maturity of the 2-year zero?(Do not round intermediate calculations. Round your answers to 3 decimal places.) Yield to Maturity 2-year zero % b. What is the yield to maturity of the 2-year coupon bond? (Do not round intermediate calculations. Round your answers to 3 decimal places.) Yield to Maturity 2-year coupon bond

Fundamentals of Financial Management (MindTap Course List)

14th Edition

ISBN:9781285867977

Author:Eugene F. Brigham, Joel F. Houston

Publisher:Eugene F. Brigham, Joel F. Houston

Chapter7: Bonds And Their Valuation

Section: Chapter Questions

Problem 16P

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BOND VALUATION You are considering a 10-year, 1,000 par value bond. Its coupon rate is 8%, and interest is paid semiannually. If you require an effective annual interest rate (not a nominal rate) of 7.1225%, how much should you be willing to pay for the bond?
Problem 15-13 Prices of zero-coupon bonds reveal the following pattern of forward rates: Year Forward Rate 2 6 7 In addition to the zero-coupon bond, investors also may purchase a 3-year bond making annual payments of $45 with par value $1,000. a. What is the price of the coupon bond? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Price b. What is the yield to maturity of the coupon bond? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Yield to maturity % IN3
Problem 15-19 The prices of zero-coupon bonds with varlous maturitles are given In the following table. Suppose that you want to construct a 2-year maturity forward loan commencing in 3 years. The face value of each bond is $1,000. Maturity (Years) Price 1 $ 998.78 2 880.89 3 815.92 4 752.40 5 685.70 a. Suppose that you buy today one 3-year maturity zero-coupon bond. How many 5-year maturity zeros would you have to sell to make your Initial cash flow equal to zero? (Round your answer to 4 decimal places.) 5-year maturity zeros b. What are the cash flows on this strategy in each year? (Negative value should be Indicated by a mlnus sign. Leave cell blank if there Is no effect. Round your answers to 2 decimal places.) Time Cash Flow 3 5
Question content area top Part 1 (Yield to maturity) A bond's market price is $1,200. It has a $1,000 par value, will mature in 12 years, and has a coupon interest rate of 8 percent annual interest, but makes its interest payments semiannually. What is the bond's yield to maturity? What happens to the bond's yield to maturity if the bond matures in 24 years? What if it matures in 6 years? Question content area bottom Part 1 a. The bond's yield to maturity if it matures in 12 years is enter your response here%. (Round to two decimal places.) Part 2 b. The bond's yield to maturity if it matures in 24 years is enter your response here%. (Round to two decimal places.) Part 3 c. The bond's yield to maturity if it matures in 6 years is enter your response here%. (Round to two decimal places.)
Problem 14-9 Consider an 5.0% coupon bond selling for $960.90 with three years until maturity making annual coupon payments. The interest rates in the next three years will be, with certainty, r1 = 5%, r2 = 7%, and r3 = 8%. Calculate the bond's (a) yield to maturity and (b) realized compound yield. (Round your answers to 2 decimal places.) Yield to maturity Realized compound yield % %
Question 2 Two bonds are available for purchase in the financial markets. The first bond is a two-year, 50,000 AUD bond that pays an annual coupon of 6 per cent. The second bond is a two- year, 10,000 AUD, zero-coupon bond. (a) What is the duration of the coupon bond if the current yield-to-maturity (R) is 6 per cent? And 8 per cent? How does the change in the current yield to maturity affect the duration of this coupon bond? (b) Calculate the duration of the zero-coupon bond with a yield to maturity of 5 per cent, and 8 per cent.
Problem 11-4 A bond currently sells for $1,030, which gives it a yield to maturity of 6%. Suppose that if the yield increases by 30 basis points, the price of the bond falls to $990. What is the duration of this bond? (Do not round intermediate calculations. Round your answer to 4 decimal places.) Duration
Problem 15-12 Below is a list of prices for zero-coupon bonds of various maturities. Price of $1,000 Par Maturity (Years) Bond (Zero-Coupon) $908.95 878.68 806.14 a. A 5.0% coupon $1,000 par bond pays an annual coupon and will mature in 3 years. What should the yield to maturity on the bond be? (Round your answer to 2 decimal places.) Yield to maturity b. If at the end of the first year the yield curve flattens out at 8.5%, what will be the 1-year holding-period return on the coupon bond? (Round your answer to 2 decimal places.) Holding-period return
Question 6 Assume that a bond makes 10 equal annual payments of \$1,000$1,000 starting one year from today. The bond will make an additional payment of \$100,000$100,000 at the end of the last year, year 10. (This security is sometimes referred to as a coupon bond.) If the discount rate is 3.5\%3.5% per annum, what is the current price of the bond?
Chapter 12Financial Planning Exercise 6Calculating and interpreting current yield and yield to maturity Find the current yield of a 10%, 25-year bond that's currently priced in the market at $1,250. Now, use a financial calculator to find the yield to maturity on this bond (use annual compounding). What's the current yield and yield to maturity on this bond if it trades at $1,000? If it's priced at $750? The par value of the bond is $1,000. Round your answers to two decimal places. Do not round intermediate calculations. Quote Current Yield Yield to Maturity 10%, 25 yr., $1,250 % % 10%, 25 yr., $1,000 % % 10%, 25 yr., $750 % %
QUESTION 7 Consider the market for a bond which has a face value of $2,000, pays a coupon of $100, and matures in 1 year (that is, you will get the face value and one coupon payment next year). Suppose the demand for such bonds is given by P=4,000-2Q, and that the supply of such bonds is given by P=1,000+Q. What is the yield to maturity if one were to purchase the bond at the equilibrium price? 5% .05% 10% .10%
Question 3 A bond has a face value or par value of $1000 and will mature at par in 10 years. The coupon rate is 10% compounded semi-annually. The yield rate is 8% compounded semi-annually. Find the excess of the semi-annual coupon payment over the required semi-annual yield. O a $10 Ob $100 Ос $20 Od $80