
Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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Which one of the following bonds is the least sensitive to interest rate risk?
Group of answer choices
5-year; 7 percent coupon
10-year; 6 percent coupon
10-year; 7 percent coupon
15-year; 6 percent coupon
15-year; 7 percent coupon
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- Consider the following two Treasury securities: Bond Price Modified duration (years) A $100 6 B $80 7 For a 25 basis-point change in interest rates, which bond has the greatest percentage change in price? A. Bond A B. Bond B C. Can't be determinedarrow_forwardPlease answer 6D.arrow_forwardSuppose the term structure of interest rate is flat. Consider the following four bonds: Bond Term to Maturity (year) Coupon rate YTM 1 5 10% 7% 2 3 7 7 10% O a. 2,3,4,1 O b. 2,1,4,3 O c. 1,2,3,4 O d. 4,3,2,1 3% 3% 7% 4 7 If the yield-to-maturity for all bonds changes by 1%, rank the bonds from the lowest percentage change in price to the largest percentage change in price based on duration approximation. 7% 5%arrow_forward
- Consider the following: Price Yield to maturity Periods to maturity Modified duration Fixed-rate Bond Fixed-rate Note 107.18 5.00% 18 6.9848 100.00 5.00% 8 3.5851 a. For an increase in interest rates of 100 basis points, determine the change in value for the fixed-rate note. Show your work. b. For an increase in interest rates of 100 basis points, determine the change in value for the fixed-rate bond. Show your work. c. Which of the two fixed-rate securities are more sensitive to increases interest rates? Why? d. What would be the most appropriate course of action to take given interest rates are expected to rise? Explain carefully.arrow_forwardData table ↑ The current zero-coupon yield curve for risk-free bonds is as follows: What is the price per $100face value of a two-year, zero-coupon, risk-free bond? The price per $100 face value of the two-year, zero-coupon, risk-free bond is $ (Click on the following icon in order to copy its contents into a spreadsheet.) Maturity (years) YTM 1 4.98% 2 5.48% 3 5.78% Print Done 4 5 5.96% 6.09% (Round to the nearest cent.) - Xarrow_forwardThe current zero-coupon yield curve for risk-free bonds is as follows What is the price per $100 face value of a four-year, zero-coupon, risk-free bond? The price per $100 face value of the four-year, zero-coupon, risk-free bond is $_______(Round to the nearest cent.)arrow_forward
- F3arrow_forwardSuppose you want to figure out the relationship between duration and maturity, so you consider the following three T-Bonds. You compute a. The duration of a two-year Treasury bond with a 10 percent semiannual coupon selling at par b. The duration of a three-year Treasury bond with a 10 percent semiannual coupon selling at par c. The duration of a four-year Treasury bond with a 10 percent semiannual coupon selling at pararrow_forwardThe prices of zero-coupon bonds with various maturities are given: maturity in years price 1 975.66 2 885.89 3 821.92 4 759.20 5 670.20 A) How could you construct a 1-year forward loan beginning in year 3? face value = ? rate of synthetic loan = ? B) How could you construct a 1-year forward loan beginning in year 4? face value = ? rate of synthetic loan = ?arrow_forward
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