The yield of the 10-year US Treasury bond is 1.20%. It is the risk-free rate. You work for investment manager and your boss asks you to calculate the price of a 10-year corporate bond that yields 3.00% more than its risk-free rate and has a face value of $1,000. The fixed coupon of this corporate bond is 5.00%. Both bonds pay coupons annually. • What is the current price of the corporate bond? • Calculate the price of the bond if its yield increased by 1.00%. • Calculate the price of the bond if its yield decreased by 1.00%. • Please discuss the risk associated with this change in interest rates?

You purchase a bond with an invoice price of $1,047. The bond has a coupon rate of 10 percent, and there are 4 months to the next semiannual coupon date. What is the clean price of the bond? Enter the answer with 2 decimals (e.g. 954.23).

In November 2016 you purchase a 4 year US Government bond. The bond has an annual coupon rate of 6.25%, paid semi-annually. If investors demand a 0.950% semiannual return, what is the price of the bond?     Select one: a. 55000 b. 1210 c. 430 d. 70

Can I get the answers to 8.1 and 8.2.

A 20 -year maturity bond with par value of $1,000 makes semiannual coupon payments at a coupon rate of 8%. Find the bond equivalent and effective annual yield to maturity of the bond if the bond price is: a. $950 b. $1,000 c. $1,050 Repeat Problem 11 using the same data, but now assume that the bond makes its coupon payments annually. Why are the yields you compute lower in this case? Solve ex 12.

Nikul

Consider a bond issued by MGM Inc. exactly two years ago. At that time the bond’s time to maturity was 30 years. The bond pays semiannual coupons with the coupon rate of 6% per year. The face value of the bond is $1000. a. What is the bond’s price today, if today’s market interest rate for bonds of comparable maturity and default risk is 8% per year?  b. You would like to speculate and believe that tomorrow the market interest rate for comparable bonds would decrease to 5%, would you buy or sell short this bond today?  c. Suppose that exactly two years from today the price of the bond will be $900, what is the annual YTM at that time?  Please explain without using excel

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) 1 2 3 4 5 Price $ 996.04 895.89 833.92 772.80 675.18 Required: a. Suppose that you buy today one 3-year maturity zero-coupon bond with face value $1,000. How many 5-year maturity zeros would you have to sell to make your initial cash flow equal to zero (specifically, what must be the total face value of those 5-year zeros)? b. What are the cash flows on this strategy in each year? c. What is the effective 2-year interest rate on the effective 3-year-ahead forward loan? d. & e. Confirm that the effective 2-year forward interest rate equals (1 + f4) ×(1 + f5)-1. You therefore can interpret the 2-year loan rate as a 2-year forward rate for the last two years. Alternatively, show that the effective 2-year forward rate equals (1 + y5) 15 + (1+y3) ³. - 1

YOUR BANK is thinking to issue a regular coupon bond (debenture) with the following particulars: Maturity = 3 years, Coupon rate = 9%, Face value = $1,500, Coupon payments are annual and paid at the end of a year. In the fixed-income securities market, the yield curve for the bond similar to the one issued by YOUR BANK is flat and it is 7.500% per annum continuously compounded. As per you, what should be the issue (offer) price per bond of YOUR BANK in US dollars?

Consider a bond with a face value of $1,000 that sells for an initial price of $700. It will pay no coupons for the first nine years and will then pay 11% coupons for the remaining 29 years. Choose an equation showing the relationship between the price of the bond, the coupon (in dollars), and the yield to maturity. O A. B. O C. O D. 700 = 700 = 700 = 700 = 110 110 9 (1+i)⁹ (1+i)⁹+1 + 110 + i) ⁹ + 1 (1 + 1,000 (1+i) 29-9 1,000 (1 + i) 9 +29 + +...+ 110 (1+i) 9+2 + 110 (1 + i)9+29-1 110 + (1 + i) ⁹ + 110 (1+i)9 +29 9+29-1 + 110 (1 + i)9 +29 + 1,000 (1+i) 9+29