You are told that the one-year spot rate is 6.5%. Use a spreadsheet to find the current long-term rates for one-two, three, four-, and five-year maturity Treasury securities if the expected one-year T-bill rates over the following four years are 7%, 7.5%, 7.85% and 8.0%, respectively. In a textbox, name and show the formula you would use.

You are told that the one-year spot rate is 6.5%. Use a spreadsheet to find the current long-term rates for one-two, three, four-, and five-year maturity Treasury securities if the expected one-year T-bill rates over the following four years are 7%, 7.5%, 7.85% and 8.0%, respectively. In a textbox, name and show the formula you would use.

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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problems should be solved by using a financial calculator or MS excel spreadsheet. Accordingly, you must show the values of all relevant time valu of money variables Findlay company recently issued bonds with a 20-year maturity, a 7.5% semiannual coupon, and a par value of $1,000. The going interest rate (kd, rd) is 6.0%, based on semiannual compounding. What is the bond's price?
You are selected as an analysis to manage a fixed income portfolio for a client in particular a corporate bond. You are considering a 3-year floating rate note with 1 year benchmark rate of 2.88%. It is priced at 685 of 1000 par value. Your analysis tells you probability of default is approximately 40%. If the issue survives over the next three years due to the industry it is in. The probability of default for each year is 9% and a volatility of 12%. What is the price of the bond
Calculate YTC using a financial calculator by entering the number of payment periods until call for N, the price of the bond for PV, the interest payments for PMT, and the call price for FV. Then you can solve for 1/YR YTC. Again, remember you need to make the appropriate adjustments for a semiannual bond and realize that the calculated 1/YR is on a periodic basis so you will need to multiply the rate by 2 to obtain the annual rate. In addition, you need to make sure that the signs for PMT and FV are identical and the opposite sign is used for PV; otherwise, your answer will be incorrect. A company is more likely to call its bonds if they are able to replace their current high-coupon debt with less expensive financing. A bond is more likely to be called if its price is above par-because this means that the going market interest rate is less than its coupon rate. Quantitative Problem: Ace Products has a bond issue outstanding with 15 years remaining to maturity, a coupon rate of 8.4%…
You find a bond with 27 years until maturity that has a coupon rate of 9 percent and a yield to maturity of 10 percent. What is the Macaulay duration? The modified duration? Note: Do not round intermediate calculations. Round your answers to 3 decimal places.
Imagine that, during a job interview, you are handed the following quotes on U.S. Treasuries: Bond Maturity Coupon rate Yield to (years) maturity 1 1 5% 4.5% 2 2 5% 5.0% 3 3 0% 5.0% Assume that the par value is $100 and coupons are paid annually, with the first coupon payment coming in exactly one year from now. The yield to maturity is also quoted as an annual rate. What should be the 1-year forward rate between years 2 and 3? a. 6.482% ○ a. O b. 6.137% c. 6.507% O d. 6.736% NAVA
Answer the following question step by step using the TVM formulas and the financial calculator. Show all working: Compute the current price of a bond which matures in 40 years and has a required rate of return of 10 percent, a semi-annual coupon rate of 6 percent. Assume the FV of the bond is par of $1000.
Answer with Excel functions and steps
Consider the following: today's interest rate for a 15-year bond is 8%; today's interest rate for a 4-year bond is 4%; the interest rate for a 5-year bond, expected in 4 years is 5%. Find the interest rate for a 6-year bond expected in 9 years. Use the geometric or compound average approach. Make sure to express your answers as a percentage.
Your investments are earning 4% per annum compounded annually. You would like to compare this to the yield on bonds which are quoted on a compounded semi-annual basis. What is the equivalent return that you are earning per annum on a compounded semi-annual basis? (Do not round intermediate calculations. Report your result as a percentage. Round the final answers to 2 decimal places. Omit the % sign in your response. For example, if your answer is 3.21%, just enter 3.21) Numeric Response
Consider a 25-year coupon bond which has a face value of $500 and a 5% coupon rate. Its current price is $500. The interest on this bond is expected to go up from 5% to 10% next year. a) Calculate the current yield of this 25-year coupon bond. b) Using the coupon bond pricing formula, calculate the expected price at which this bond will be sold next year. c) Calculate the expected rate of return if you buy the bond today and sell it next year. d) Are you going to invest on this bond if your investment horizon is just one year? Explain why or why not.

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