Two bonds A and B have the same credit rating, the same par value and the same coupon rate. Bond A has 30 years to maturity and bond B has five (5) years to maturity. Please demonstrate your understanding of interest rates risk by answering the following questions : Discuss which bond will trade at a higher price in the market Discuss what happens to the market price of each bond if the interest rates in the economy go up. Which bond would have a higher percentage price change if interest rates go up?

If an investor expect interest rates to go up, the investor should sell a long-term bond now. True or False

. Risks of investing in bonds A security with higher risk will have a higher expected return. A bond’s risk level is reflected in its yield, but understanding the different risks involved when investing in bonds is important. The curves on the following graph show the prices of two 10% annual coupon bonds at various interest rates.      Based on the graph, which of the following statements is true? Neither bond has any interest rate risk.   The 1-year bond has more interest rate risk.   Both bonds have equal interest rate risk.   The 10-year bond has more interest rate risk.     Which type of bonds offer a higher yield? Noncallable bonds   Callable bonds     Answer the following question based on your understanding of interest rate risk and reinvestment risk. True or False: Assuming all else is equal, the shorter a bond’s maturity, the more its price will change in response to a given change in interest rates. False   True

Longer maturity bonds have low Blank 1 risk but high Blank 2 risk, while higher coupon bonds have a lower level of Blank 3 risk and a higher level of Blank 4 risk. To account for the effects related to both a bond's maturity and coupon, many analysts focus on a measure called duration, which is the Blank 5 of the time it takes to receive each of the bond's cash flows.

can you may this calculations for each of my bonds?. For each of your bonds, calculate expected defavvult percent loss as = default probability* (1 - recovery rate ). You will need to use the default rates and recovery rates that match each bond's rating. 4. Calculate the overall expected loss to your portfolio as the weighted average of the expected default percent loss

9. Interest Rate Risk. Suppose that you are a fixed income portfolio manager at Bourbon Street Capital. You have the following bonds issued by Royal, Inc. and Chartres, LLC in your portfolio and you want to understand the risk profile of your portfolio. Given that both bonds pay semiannual coupons, answer the following questions. (Remember to convert your answer to units of full years.) Coupon Yield to maturity Maturity (years) Royal, Inc. Chartres, LLC. Bond A Bond B 9% 8% 5 $100.00 $104.055 8% 8% 2 Par $100.00 Price $100.00 (a) What is the DV01 (at current prices) for bonds A and B? (b) What are the Macaulay Durations (at current prices) for the two bonds? (c) What are the modified durations for the two bonds? (d) What is the convexity of the two bonds?

Please help with section d!!

Consider two types of bonds: A 10 year to maturity corporate bond and a 10 year to maturity Treasury bond. We know that Corporate Bonds have default risk. Discuss the impact on the markets for these two type of bonds & on the risk premium when there is a FALL in the risk of corporate default? Provide a DISCUSSION of the impact and ILLUSTRATE the impact graphically using two diagrams, one for corporate bonds and one for Treasuries. The diagrams should show the impact on each yield and the impact on the risk premium [label your diagram clearly to illustrate the old premium vs. the new premium]. hint: draw your diagrams side by side, so you can show the risk premiums as done in lecture.

Which one of the following will decrease the current yield of a bond? changing the frequency of coupon payment from semi-annual to annual. increasing the face value. increasing the coupon rate. decreasing the yield to maturity. decreasing the bond price.

Bond price and bond value are the same thing.  The price an investor should pay for something should be (is) equal to its value.   A bond with a coupon rate of 3.5% matures in 11 years.  Yields are currently 3%.  What is the price of the bond? Answer: