PRIN.OF CORPORATE FINANCE
13th Edition
ISBN: 9781260013900
Author: BREALEY
Publisher: RENT MCG
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Chapter 3, Problem 32PS
Summary Introduction
To construct: Table showing present value a bond.
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The bond shown in the following table attached pays interest
annually.
a. Calculate the yield to maturity (YTM)for the bond.
b. What relationship exists between the coupon interest rate and yield to maturity and the par value and market value of a bond? Explain.
Use the following table to find the bond value: a. Price the bonds from the above table with annual coupon payments. b. Price the bonds from the above table with semiannual coupon payments.
A question asks to obtain weekly interest rate data from different bond types and to plot them. Then it asks to determine the shape of the yield curve. Does that mean I should plot the yields or am I meant to infer the yield curves from the interest rate plots?
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 bond's annual coupon rate divided by its market price is referred to as the Multiple Choice yield to call. yield to maturity. current yield. term structure of interest rates.arrow_forwardWrite down an equation for the three main components of the nominal long term interest rate on a bond, clearly explaining what each symbol stands for.arrow_forwardThe Macaulay duration is the weighted average number of coupon periods until a bond’s scheduled cash flows. Select one: True Falsearrow_forward
- To calculate the price of a coupon bond, the following information is required: Select one: O A. Face value of the bond, yield to maturity rate, maturity date and inflation rate. O B. Face value of the bond, yield to maturity rate, maturity date, coupon rate and inflation. O C. Face value of the bond, inflation rate, coupon rate and coupon rate. O D. Face value of the bond, yield to maturity rate, maturity date and coupon rate.arrow_forwardThe formula (Coupon Payment / Current bond price) calculates the _______. Multiple Choice Current yield. Risk-free rate. Coupon rate. Yield to maturity Bond premium.arrow_forwardBond prices. Price the bonds from the following table with annual coupon LOADING... payments: .arrow_forward
- The rate of return that you would earn if you bought a bond and held It to its maturity date is called the bond's yield to maturity (YTM). If Interest rates in the economy rise after a bond has been issued, what will happen to the bond's price and to Its YTM? Does the length of time to maturity affect the extent to which a given change in interest rates will affect the bond's price? Briefly explain with necessary numerical data.arrow_forwardhe yield that a bond will earn given that it is bought back by the issuer at the earliest possible date is the: Select one: a. current yield b. yield to maturity c. yield to put d. market yield e. yield to callarrow_forwardAll computations must be done and shown manually Question 4 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. Please include graph as per above information 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. 10 9 8 7 6 5 4 3 2 1 0arrow_forward
- Current yield is used to determine Seleccione una: a. A portion of the yield on an investment b. The payout of a bond investment c. The amount of money a bond investor will earn d. The coupon rate of a bond investmentarrow_forwardGiven the coupons, par values, market rates and market prices below, please calculate the prices for bonds A-D and the yields for bonds D-G. Coupon Par value Market rate Cash flows: Price 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5 5.0 5.5 Given the coupons, par values, market rates and market prices below, please calculate the prices for bonds A-D and the yields for bonds D-G. F 3.25% 6.0 6.5 7.0 B 7.5 8.0 2.1% с 1.8% B 2.6% 3.0% 2.8% E 3.1% D 0.0% 1,000 F 2.4% Coupon Par Value Cash flows: Market price Yield 0.5 1.0 1.5 INNM m 4 t nosono 2.0 2.5 3.0 3.5 4.0 4.5 5.0 H 5.5 6.0 6.5 7.0 7.5 8.0 2.40% (921) 4.40% (762) K (801) G 0.00% 1,000 (449)arrow_forwardThe annual interest rate on a bond is called it's ______ rate Par Coupon Best Estimatedarrow_forward
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