Problem 1a (20 points): Calculate the duration of a $1,000, 6% coupon bond with three years to maturity. Assume that all market interest rates are 7%. Solution to 1a: Payments PV of Payments Year 1 Year 2 Year 3 Time Weighted PV of Payments Time Weighted PV of Payments Divided by Price Curent bond price Duration of the Bond: Problem 1b (20 points): Consider the bond in Problem 1a. Calculate the expected price change if interest rates drop to 6.75% using the duration approximation. Also calculate the actual price change using discounted cash flow. Solution to 1b: Using the duration approximation, the price change is calculated as: Duration of the Bond: Change in interest rates Curent bond price Bond price change New Bond price after interest rate change Now using a discounted cash flow approach to get the new bond price with the interest rate change: Payments PV of payments New Bond price after interest rate change Year 1 Sum Year 2 Year 3 Sum

Need help finding the current yield for both bond P and D, & the capital yield gains for both bonds P and D. Thank you in advance

Q2. Duration and Convexity Bond A has face value at $1,000, coupon rate of 6% paid semi-annually, 5 years to maturity, and a yield to maturity of 7%. a. Using the bond pricing formula, calculate the price of the bond and duration. ABC b. Calculate the convexity of the bond. c. Using the calculations from above, what is the "approximated bond price change" using duration and convexity, if the interest rate increases by 1%? d. What is the actual change in the bond price if the interest rate increases by 1%? e. Based on c) and d) above, discuss the roles of duration and convexity in estimating the price change. Which risk measure plays a bigger role? f. Suppose you have two bonds with the same maturity date but one bond has a 10% coupon rate while the other has a 5% coupon rate. Which of these two bonds would have a higher duration?

2. Consider a bond with a 7.5% annual coupon rate and a face value of $1,000. Calculate the bond price and duration & show your work. Years to Maturity Interest rate Bond Price Duration 4 6. 6. 9. What relationship do you observe between yield to maturity and the current market value? What is the relationship between YTM and duration?

Subject:- finance

A fixed rate bond with notional 1 pays annual coupons of c at times T1,T2,...,Tn whereTi+1 =Ti+1andnotional1attimeTn. a)  Write down the bond price Bc^(FXD)(t) at time t ≤ T in terms of ZCBs.

If you have a coupon bond, its face value is $1,000 and the coupon rate is 4%. Complete the following table, then calculate the rate of return for the bond. If you know that it was purchased at the nominal value, comment on the results. due date return at maturity the price 2 0.02   3 0.04   5 0.06   Present Value Annuity value % n value % n 0.961 0.02 2 1.97 0.02 2 0.925 0.04 2 1.89 0.04 2 0.889 0.04 3 2.78 0.04 3 0.906 0.02 5 4.71 0.02 5 0.747 0.06 5 4.21 0.06 5

K Assume that a bond will make payments every six months as shown on the following timeline (using six-month periods): 0 2 5 Period $19.53 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? Cash Flows View an example Get more help. ★ a. What is the maturity of the bond (in years)? The maturity is years. (Round to the nearest integer.) A 6 1 MacBook Pro & 7 $19.53 * 8 9 C 59 $19.53 60 $19.53+$1,000 Clear all BUB 0 {

Exercise: Dirty/cleanPrice calculation A bond has face value of $1000. The bond’s yield to maturityis 6% andthe annual coupon rate is 8% with semiannual coupon payments.The maturity of the bond is 5years. The bond was issued on 1/1/2017, and one bought on 4/1/2018. Answer the following three questions: a.What is the dirty price of the bond? b.What is the accrual interest of the bond? c.What is its clean price?

See attached question:   Thank you.