Question

Given the purchase prices, coupons and maturities of four bonds, calculate the yields to maturity to you, the investor. Assume a $1,000 par value. Bonds A, B, and C are semi-annual. Bond D is a zero but calculate its yield with a semi-annual equivalency. Provide your answers to 4 significant digits (example: 6.1234%) Bond A Price 984.00, annual coupon 3%, maturing in 2 years Bond B Price 799.00, annual coupon 6%, maturing in 5 years Bond C Price 767.00, annual coupon 5%, maturing in 10 years Bond D Price 566.34, maturing in 8 years

Answer #1

Here,

Bond A | Bond B | Bond C | Bond D | |

Buying Price | 984 | 799 | 767 | 566.34 |

Annual Coupon | 3% | 6% | 5% | |

Maturity(yrs) | 2 | 5 | 10 | 8 |

Coupon Frequency | Semi Annual | Semi Annual | Semi Annual | Zero |

Face Value | 1000 | |||

Bond A | Bond B | Bond C | Bond D | |

06-05-2020 | -984 | -799 | -767 | -566 |

06-11-2020 | 15 | 30 | 25 | 0 |

06-05-2021 | 15 | 30 | 25 | 0 |

06-11-2021 | 15 | 30 | 25 | 0 |

06-05-2022 | 1015 | 30 | 25 | 0 |

06-11-2022 | 30 | 25 | 0 | |

06-05-2023 | 30 | 25 | 0 | |

06-11-2023 | 30 | 25 | 0 | |

06-05-2024 | 30 | 25 | 0 | |

06-11-2024 | 30 | 25 | 0 | |

06-05-2025 | 1030 | 25 | 0 | |

06-11-2025 | 25 | 0 | ||

06-05-2026 | 25 | 0 | ||

06-11-2026 | 25 | 0 | ||

06-05-2027 | 25 | 0 | ||

06-11-2027 | 25 | 0 | ||

06-05-2028 | 25 | 1000 | ||

06-11-2028 | 25 | |||

06-05-2029 | 25 | |||

06-11-2029 | 25 | |||

06-05-2030 | 1025 | |||

Rate of Return | 3.8753% | 11.6982% | 8.6813% | 7.3604% |

1. The following is a list of
prices for zero-coupon bonds of various maturities. Calculate the
yields to maturity of each bond and the implied sequence of forward
rates.
maturity years: Price of bond
1 943.40
2 898.47
3 847.62
4 792.16
2. [Chapter 15] The current yield curve
for default-free zero-coupon bonds is as follows:
Maturity (Years): YTM%
1 10%
2 11%
3 12%
a. What are the implied
1-year forward rates?
b. Assume that the pure
expectations hypothesis of the term structure...

The following is a list of prices for zero-coupon bonds of
various maturities. Calculate the yields to maturity of each bond
and the implied sequence of forward rates. (Do not round
intermediate calculations. Round your answers to 2 decimal places .
Omit the "%" sign in your response.
Maturity (Years)
Price of Bond
YTM
Forward Rate
1
$980.90
___%
2
$914.97
___%
____%
3
$843.12
___%
____%
4
$771.76
___%
____%

Assume coupons are paid annually. Here are the prices of three
bonds with 10-year maturities:
Bond Coupon
(%)
Price (%)
3
87.50
5
106.50
9
137.50
a. What is the yield to maturity of each
bond?
b. What is the duration of each bond?

Below is a list of prices for $1,000-par zero-coupon Treasury
securities of various maturities. An 12% coupon $100 par bond pays
an semi-annual coupon and will mature in 1.5 years. What should be
the YTM on the bond? Assume semi-annual interest compounding for
this question. Round your answer to 4 decimal places. For example
if your answer is 3.205%, then please write down 0.0321. Maturity
(periods) Price of $1,000 par bond 1 943.4 2 873.52 3 770

Below are yields of risk-free zero-coupon $1,000-par-value bonds
of various maturities.
Maturity (years)
1
2
3
4
5
YTM
3.25%
3.50%
3.9%
4.25%
Fill in the blank if market price of the five-year zero-coupon
bond is 809.79.
Construct yield curve using values from the table.
Suppose you would like to finance a project with equity. The
project is expected to deliver cash flows during the next 3 years.
Which of the risk-free rates from the table above you would use...

Assume coupons are paid annually. Here are the prices of three
bonds with 10-year maturities. Assume face value is $100.
bond coupons (%) price (%)
3 86.00
6 105.00
8 136.00
a. What is the yield to maturity of each bond?
b. What is the duration of each bond?

The following is a list of prices for zero-coupon bonds of
various maturities.
a. Calculate the yield to maturity for a bond
with a maturity of (i) one year; (ii) two years; (iii) three years;
(iv) four years. (Do not round intermediate
calculations. Round your answers to two decimal
places.)
b. Calculate the forward rate for (i) the
second year; (ii) the third year; (iii) the fourth year.
(Do not round intermediate calculations.
Round your answers to two decimal places.)...

The following is a list of prices for zero-coupon bonds of
various maturities.
a. Calculate the yield to maturity for a bond
with a maturity of (i) one year; (ii) two years; (iii) three years;
(iv) four years. (Do not round intermediate
calculations. Round your answers to two decimal
places.)
Maturity (years)
Price of Bond
1
$
955.90
2
916.47
3
834.12
4
766.39
b. Calculate the forward rate for (i) the
second year; (ii) the third year; (iii) the...

The following is a list of prices for zero-coupon bonds with
different maturities and par values of $1,000.
Maturity (Years)
Price maturity 1 year = $ 925.15
Price maturity 2 years = 862.57
Price maturity 3 years = 788.66
Price maturity 4 years = 711.00
According to the expectations theory, what is the expected
forward rate in the third year?

1.Fill in the table below for the following zero-coupon bonds,
all of which have par values of $1,000. Use semi-annual
periods.
Price
Maturity (semi-annual periods)
Semi-Annual Period Rates
$
20
4.60
%
$
20
3.10
%
$
2.Consider a zero-coupon bond with an expect return of 5.5%, 15
years to maturity and a par-value of $1,000. (Assume annual
compounding)
a. Find the bond's price today..
b. What is the value of the bond next year if
interest rates increase to...

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