The following table represents the term structure of spot interest rates: Rate (% p.a., semi- annual compounding) Term (years) 0.50 1.00 1.50 2.00 2.50 3.00 3.30% 3.92% 4.35% 4.52% 1 Consider two bonds - Bond A and Bond B. Bond A has a maturity of 1.5 years and pays coupons semi-annually at the rate of 10% per year. Its yield to maturity is 3.9050% p.a., semi- annual compounding. Bond B has a maturity of 3 years and pays coupons semi-annually at the rate of 7% per year. Its yield to maturity is 4.4805% p.a., semi-annual compounding. What are the spot interest rates for the terms of 1 year and 2 years?

The following table represents the term structure of spot interest rates: Rate (% p.a., semi- annual compounding) Term (years) 0.50 1.00 1.50 2.00 2.50 3.00 3.30% 3.92% 4.35% 4.52% 1 Consider two bonds - Bond A and Bond B. Bond A has a maturity of 1.5 years and pays coupons semi-annually at the rate of 10% per year. Its yield to maturity is 3.9050% p.a., semi- annual compounding. Bond B has a maturity of 3 years and pays coupons semi-annually at the rate of 7% per year. Its yield to maturity is 4.4805% p.a., semi-annual compounding. What are the spot interest rates for the terms of 1 year and 2 years?

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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You are given the following information. All bonds are from the same issuer (same credit risk). Bond Coupon Rate Maturity Price ($) 6% 1036.17 5% 2 1041.49 C 6% 3 1074.21 All coupon payments are annual and face values are $1000. Answer the following and express rates as a %, to 2 decimal places a) Determine the 1-, 2- and 3-year spot rates from the given prices (Use the Bootstrapping method). 1- Year Spot rate is 2- Year Spot rate is 3- Year Spot rate is b) Compute the implied annual forward rate from year one to year two, i.e., f2 --> c) Compute the implied annual forward rate from year two to year three, i.e., f3 -->
Suppose you are provided with the following table of spot rates of different maturity bonds: Year Spot rate 1 8 2 9 3 7 4 8 5 10 Calculate, respectively, one period forward rates of these bonds for year 2, year 3 and year 4.
A 14-year, $1,000 par value Fingen bond pays 6% interest annually (assume semi- annual payments). The price of the bond is $1,100 and the market's required yield to maturity on a comparable-risk bond is 5.50%. a. Compute the bonds yield to maturity. b. Determine the value of the bond to you, given your required rate of return (the YTM on a comparable-risk bond). c. Should you purchase the bond? a. b. Coupon rate Par (FV) Years (n) m PMT PV (price) YTM Coupon rate Par (FV) Years (n) m PMT PV (price) YTM 6.0% $1,000 14 2 $30 Calculation $1,100 6.0% $1,000 14 2 $30 Calculation Note: if you want PV to be a positive number, you must use a minus sign for both pmt and FV 5.50%
Consider a 3 year bond with face value £150,000 with annual coupons paid at rate 5.1% and redeemable at face value
Company has started producing and selling drones to consumers. their goal was to optimize their process. Given that the drone production has factory costs of $17, 500, a design cost of $18, 500, and an additional total variable cost of $(5.0Q^ 2+4.7Q-48) in labor and parts. They plan on selling each unit at $900. If the goal is to minimize average cost, how many drones should they sell? Round your answer the nearest whole unit
Consider a one-year discount bond that has a present value of P1,500. If the rate of discount is 4 percent, the future value of the bond (the amount the bond pays in one year) is * P1,560.00 P1,540.00 P1,440.00 P1,442.31
Bond Durations: (A) Compute the duration and modified duration of a 7-year bond that makes annual payments with a coupon rate of 10% and a YTM of 9%. (B) If interest rates FALL by 100 basis points, what is the dollar and percentage change in price? (C) If interest rates RISE by 100 basis points, what is the dollar and percentage change in price?
For a one year bond of $2,300 at a simple interest rate of 10% per year, find the semiannual interest payment and the total interest earned over the life of the bond. The semiannual interest on the bond is s (Simplify your answer. Type an integer or a decimal. Round to the nearest cent as needed.) The total interest on the bond is $. (Simplify your answer. Type an integer or a decimal. Round to the nearest cent as needed.)
Referring to the table below is the information about three RM1000 par value bonds and each of which pays coupon semiannually. The required rate of return on each bond is 12%. Calculate the value of the bonds and determine whether the bond is selling at discount, premium or par value. Bond Coupon Rate (%) Maturity (years) 1 10 5 2 12 10 3 14 15
The 3-year interest rate is 6.60%, and the 4-year interest rate is 7.90%. The liquidity premia for 3- and 4-year bonds are 0.60% and 0.9%, respectively. Calculate the adjusted forward-rate forecast for 3 periods in the future. (Round your answer to two decimal points.)
Can the following equation be used to find the value of a bond with N years to maturitythat pays interest once a year? Assume that the bond was issued several years ago.

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