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- Suppose that a portfolio management company manages an investment fund. The fund manager observes a bond in the market and intends to add it to the fund portfolio. The bond has a 100.000 TL par value, 10% coupon rate (coupon payments are annual) and a 2-years maturity. The business model is to “hold-until-maturity”. The company purchases the bond at the beginning of the year when the market yields are 12%. After exactly 1 year of investment, market yields increase to 14%. What would be the approximate profit or loss amount in the income statement for that 1-year period? A) 1.723 TL loss B) 10.191 TL profit C) 9.871 TL profit D) 1.594 TL loss E) OTHERSuppose that a portfolio management company manages an investment fund. The fund manager observes a bond in the market and intends to add it to the fund portfolio. The bond has a $100.000 par value, 10% coupon rate (coupon payments are annual) and a 2-years maturity. The business model is to “hold-until-maturity”. The company purchases the bond at the beginning of the year when the market yields are 12%. After exactly 1 year of investment, market yields increase to 14%. What would be the approximate profit or loss amount in the income statement for that 1-year period? A) $ 1,594 loss B) $ 1,723 lossC) $ 9,871 profit D) $ 10,191 profitE) Other (please specify)Suppose you purchase a 10-year bond with 6% annual coupons. You hold the bond for fouryears, and sell it immediately after receiving the fourth coupon. If the bond’s yield to maturitywas 5% when you purchased and sold the bond,a. What cash flows will you pay and receive from your investment in the bond per $100 face value?b. What is the internal rate of return of your investment?
- Use of a financial calculator or Excel (functions PRICE and YIELD will be helpful) will be helpful to calculate the following problems. Show your work, include your calculator entries (i.e. N, PV, PMT, FV, IM, and/or Excel formulas where applicable. 1. Suppose there is a bond with a par value of $1,000 that matures in 6 years. Coupon payments are made annually. The coupon rate is 9%. It has a 12% yield to maturity. The annual coupon payments = $ b. The price of the bond today (present value) = $1 ) Solve the following quesitons in an Excels spreadsheet, and create a cash-flow table for each Bond A and Bond B over 6 years. a) Calculate the yield rates for two bonds described below. b) Correctly use Rate of Return (ROR) analysis to determine which, if either, bond an investor with a MARR of 10%, should purchase. c) Confirm your answer to part (b) using Present Worth Analysis. Type out formulas used and calculations performed. d) Confirm your answer to part (b) using Annual Worth Analysis. Type out formulas used and calculations performed.You are a fixed income analyst with an active investment in two bonds. X and Y. Bond X has a coupon rate of 9% and Bond Y has a 10% annual coupon. Both bonds have 5 years to maturity. The yield to maturity for both bonds is now 10%. If the required return rises by 14%, by what percentage will the price of the bond X change? Please provide complete details of the calculations (formula/steps) of the above question
- An investor is presented with the following two alternative investment strategies: purchase a 3-year bond with an interest rate of 6% and hold it until maturity or, purchase a 1-year bond with an interest rate of 7%, and when it matures, purchase another 1-year bond with an expected interest rate of 6%, and when it matures, purchase another 1-year bond with an interest rate of 5%. What is the expected return of the first strategy? What is the expected average return over the 3-years for the second strategy? Why does our anayses of the expectations theory indicate that this is exactly what you should expect to find?You are employed by an investment bank to estimate the value of a coupon-paying bond with the following features. It has a face value of $100,000, pays quarterly coupons at a rate of 10% p.a. and the market required yield to maturity is 8% p.a. compounding quarterly. There is one full quarter until the next payment will be received and the bond matures in 4 years. Which of the following is closest to the market value of the bond? A. $106,789 B. $105,288 C. $94,871 D.$93,473 E. Need more information to answer the question I calculated and I got $106,789, is it correct?You are employed by an investment bank to estimate the value of a coupon-paying bond with the following features. It has a face value of $100,000, pays quarterly coupons at a rate of 10% p.a. and the market required yield to maturity is 8% p.a. compounding quarterly. There is one full quarter until the next payment will be received and the bond matures in 4 years. Which of the following is closest to the market value of the bond? Group of answer choices A) $106,789 B) Need more information to answer the question C) $105,288 D) $93,473 E) $94,871
- Suppose you purchase a 10-year bond with 6.19% annual coupons. You hold the bond for 4 years, and sell it immediately after receiving the fourth coupon. If the bond's yield to maturity was 5.34% when you purchased and sold the bond, a. what cash flows will you pay and receive from your investment in the bond per $100 face value? b. what is the annual rate of return of your investment? a. What cash flows will you pay and receive from your investment in the bond per $100 face value? The cash flows from the investment are shown in the following timeline: (Round to the best choice below.) A. Years 0 2 3 4 Cash Flows $106.46 $6.19 $6.19 $6.19 $110.46 B. Years 0 2 3 4 Cash Flows - $106.46 $6.19 $6.19 $6.19 $110.46 ○ C. Years 0 2 3 4 Cash Flows $104.27 $6.19 $6.19 $6.19 $110.46 D. Years 0 2 3 4 Cash Flows - $110.46 $6.19 $6.19 $6.19 $104.27 b. What is the annual rate of return of your investment? The annual rate of return of your investment is %. (Round to two decimal places.)Suppose you purchase a 10-year bond with 6.19% annual coupons. You hold the bond for 4 years, and sell it immediately after receiving the fourth coupon. If the bond's yield to maturity was 5.34% when you purchased and sold the bond, a. what cash flows will you pay and receive from your investment in the bond per $100 face value? b. what is the annual rate of return of your investment? a. What cash flows will you pay and receive from your investment in the bond per $100 face value? The cash flows from the investment are shown in the following timeline: (Round to the best choice below.) A. Years 2 3 Cash Flows $106.46 $6.19 $6.19 $6.19 $110.46 B. Years 0 2 3 4 Cash Flows - $106.46 $6.19 $6.19 $6.19 $110.46 C. Years 0 1 2 3 4 Cash Flows $104.27 $6.19 $6.19 $6.19 $110.46 D. Years 0 2 3 4 + $6.19 $6.19 $6.19 $104.27 Cash Flows - $110.46 b. What is the annual rate of return of your investment? The annual rate of return of your investment is %. (Round to two decimal places.)Suppose you purchase a 10-year bond with 6.64% annual coupons. You hold the bond for 4 years, and sell it immediately after receiving the fourth coupon. If the bond's yield to maturity was 5.17% when you purchased and sold the bond, a. what cash flows will you pay and receive from your investment in the bond per $100 face value? b. what is the annual rate of return of your investment? a. What cash flows will you pay and receive from your investment in the bond per $100 face value? The cash flows from the investment are shown in the following timeline: (Round to the best choice below.) OA. Years Cash Flows O B. Years C. Years Cash Flows Cash Flows - $114.06 O D. Years 0 Cash Flows $107.42 0 0 - $111.26 0 $111.26 1 $6.64 1 $6.64 1 $6.64 1 $6.64 2 $6.64 2 + $6.64 2 + $6.64 2 + $6.64 3 $6.64 3 $6.64 3 $6.64 3 $6.64 b. What is the annual rate of return of your investment? The annual rate of return of your investment is %. (Round to two decimal places.) 4 $114.06 4 $107.42 4 $114.06 4…