PRIN.OF CORPORATE FINANCE
13th Edition
ISBN: 9781260013900
Author: BREALEY
Publisher: RENT MCG
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Textbook Question
Chapter 3, Problem 12PS
Duration Here are the prices of three bonds with 10-year maturities:
If coupons are paid annually, which bond offered the highest yield to maturity? Which had the lowest? Which bonds had the longest and shortest durations?
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Students have asked these similar questions
The following table summarizes prices of various default-free zero-coupon bonds (expressed as a percentage of the face value):
Maturity (years)
Price (per $100 face value)
1
$96.32
a. Compute the yield to maturity for each bond.
b. Plot the zero-coupon yield curve (for the first five years).
c. Is the yield curve upward sloping, downward sloping, or flat?
a. Compute the yield to maturity for each bond.
The yield on the 1-year bond is
%. (Round to two decimal places.)
2
$91.93
3
$87.36
4
5
$82.57
$77.42
The following table summarizes prices of various default-free zero-coupon bonds (expressed as a percentage of the face value):
a. Compute the yield to maturity for each bond.
b. Plot the zero-coupon yield curve (for the first five years).
c. Is the yield curve upward sloping, downward sloping, or flat?
a. Compute the yield to maturity for each bond.
The yield on the 1-year bond is 3.92 %. (Round to two decimal places.)
Data table
(Click on the following icon in order to copy its contents into a spreadsheet.)
Maturity (years)
Price (per $100 face value)
1
$95.51
2
3
$91.10
$86.55
$81.69
$76.45
Print
Donday
Assume that a bond will make payments every six months as shown on the following timeline (using six-
month periods):
Period
0
Cash Flows
$20.87
a. What is the maturity of the bond (in years)?
b. What is the coupon rate (as a percentage)?
c. What is the face value?
2
$20.87
***
a. What is the maturity of the bond (in years)?
The maturity is years. (Round to the nearest integer.)
39
$20.87
40
$20.87 + $1,000
Chapter 3 Solutions
PRIN.OF CORPORATE FINANCE
Ch. 3 - (PRICE) In February 2009, Treasury 8.5s of 2020...Ch. 3 - (YLD) On the same day, Treasury 3.5s of 2018 were...Ch. 3 - (DURATION) What was the duration of the Treasury...Ch. 3 - (MDURATION) What was the modified duration of the...Ch. 3 - Bond prices and yields A 10-year bond is issued...Ch. 3 - Bond prices and yields The following statements...Ch. 3 - Bond prices and yields Construct some simple...Ch. 3 - Bond prices and yields A 10-year German government...Ch. 3 - Bond prices and yields A 10-year German government...Ch. 3 - Bond prices and yields A 10-year U.S. Treasury...
Ch. 3 - Bond returns If a bonds yield to maturity does not...Ch. 3 - Bond returns a. An 8%, five-year bond yields 6%....Ch. 3 - Prob. 10PSCh. 3 - Duration True or false? Explain. a....Ch. 3 - Duration Here are the prices of three bonds with...Ch. 3 - Duration Calculate the durations and volatilities...Ch. 3 - Prob. 14PSCh. 3 - Duration Find the spreadsheet for Table 3.4 in...Ch. 3 - Prob. 16PSCh. 3 - Spot interest rates and yields Which comes first...Ch. 3 - Prob. 18PSCh. 3 - Spot interest rates and yields Look again at Table...Ch. 3 - Prob. 20PSCh. 3 - Spot interest rates and yields Assume annual...Ch. 3 - Spot interest rates and yields A 6% six-year bond...Ch. 3 - Spot interest rates and yields Is the yield on...Ch. 3 - Prob. 24PSCh. 3 - Measuring term structure The following table shows...Ch. 3 - Term-structure theories The one-year spot interest...Ch. 3 - Term-structure theories Look again at the spot...Ch. 3 - Real interest rates The two-year interest rate is...Ch. 3 - Prob. 30PSCh. 3 - Bond ratings A bonds credit rating provides a...Ch. 3 - Prob. 32PSCh. 3 - Price and spot interest rates Find the arbitrage...Ch. 3 - Prob. 34PSCh. 3 - Prices and spot interest rates What spot interest...Ch. 3 - Prices and spot interest rates Look one more time...
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- The following table summarizes prices of various default-free zero-coupon bonds (expressed as a percentage of the face value):. a. Compute the yield to maturity for each bond. b. Plot the zero-coupon yield curve (for the first five years). c. Is the yield curve upward sloping, downward sloping, or flat? a. Compute the yield to maturity for each bond. The yield on the 1-year bond is%. (Round to two decimal places.) Data table (Click on the following icon Maturity (years) Price (per $100 face value) in order to copy its contents into a spreadsheet.) 2 $91.99 3 $87.33 1 $96.35 Print Done 4 $82.48 5 $77.37 Xarrow_forwardthe following are three 15-year bonds. The three semiannual coupon rates are 0%, 3.5%, and 7%. Which coupon rate belongs to which bond? What is the shape (“increasing”, “decreasing”, or “flat”) of the term structure of spot rates underlying the valuation of these bonds?arrow_forwardThe return an investor earns on a bond over a period of time is known as the holding period return, defined as interest income plus or minus the change in the bond's price, all divided by the beginning bond price. a. What is the holding period return on a bond with a par value of $1,000 and a coupon rate of 7.5 percent if its price at the beginning of the year was $1,070 and its price at the end was $960? Assume interest is paid annually. Note: Negative value should be indicated by parenthesis. Round your answer to 2 decimal places. Holding period return %arrow_forward
- Complete the following table and draw a graph showing how bond price for each bond changes over time as they move towards their maturity dates. Describe the relationship between bond prices and time remaining for maturity. Years remaining to maturity BOND A Coupon rate = 8% p.a. Market interest rate = 6% p.a. BOND B Coupon rate = 6% p.a. Market interest rate = 6% p.a. BOND C Coupon rate = 4% p.a. Market interest rate = 6% p.a.arrow_forwardAssume that a bond will make payments every six months as shown on the following timeline (using six-month periods): Period 1 2 29 30 Cash Flows $20.37 $20.37 $20.37 $20.37 + $1,000 a. What is the maturity of the bond (in years)? b. What is the coupon rate (as a percentage)? c. What is the face value?arrow_forwardConsider information on the following bonds (with face value 100): Bond Maturity (years) Coupon rate Yield-to-maturity А 1 0% 5.0% В 2 5% 5.5% C 3 6% 6.0% Coupons are paid annually. What is the three-year spot interest rate?arrow_forward
- Assume coupons are paid annually. Here are the prices of three bonds with 10-year maturities. Assume face value is $100. Bond Coupon (%) Price (%) 2 80.22 4 8 96.79 135.42 a. What is the yield to maturity of each bond? b. What is the duration of each bond?arrow_forwardAssume that a bond will make payments every six months as shown on the following timeline (using six-month periods): a. What is the maturity of the bond (in years)? (Round to the nearest integer.)b. What is the coupon rate (as a percentage)? (Round to two decimal places.)c. What is the face value? (Round to the nearest dollar.)arrow_forwardYield to maturity. What is the yield of each of the following bonds, , if interest (coupon) is paid semiannually?arrow_forward
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