Question

1.

Assume you buy a bond with the following features

Bond maturity = 4

Coupon Rate = 5%

Face Value = $1,000

Annual Coupons

When you buy the bond the market interest rate = 4.50%

Immediately after you buy the bond the interest rate changes to
6.71%

What is the "reinvestment" effect in year 3 ?

2.

Bond E has the following features:

Face value = $1,000, Coupon Rate = 10%,

Maturity = 5 years, Yearly coupons

The market interest rate is 3.03%

If interest rate remains at 3.03% for the life of the bond (i.e., 3.03 years), what is the price of Bond E in year 1?

3.

How much would you pay today for a bond that has a face value of $1,000, and annual coupon of $99 and a maturity of 8 years? (=what is the price of the bond?)

The annual interest rate is 4.08%?

Answer #1

....

Assume you buy a bond with the following features Bond maturity
= 4 Coupon Rate = 4% Face Value = $1,000 Annual Coupons When you
buy the bond the market interest rate = 4.22% Immediately after you
buy the bond the interest rate changes to 7.98% What is the
"reinvestment" effect in year 3 ?

Bond E has the following features: Face value = $1,000, Coupon
Rate = 7%, Maturity = 5 years, Yearly coupons The market interest
rate is 3.09% If interest rate remains at 3.09% for the life of the
bond (i.e., 3.09 years), what is the price of Bond E in year 2?

Bond E has the following features:
Face value =
$1,000, Coupon Rate =
9%,
Maturity = 5 years, Yearly coupons
The market
interest rate is 3.47%
If interest rate remains at 3.47% for the life of the bond
(i.e., 3.47 years), what is the price of Bond E in year 2?

1.
What is the price of a bond with the following features?
Face Value = $1,000
Coupon Rate = 7% (stated as an ANNUAL rate)
Semiannual coupon payments
Maturity = 7 years
YTM = 6.34% (Stated as an APR)
State your answer to the nearest penny (e.g., 984.25)
2.
Assume you buy a bond with the following features
Bond maturity = 4
Coupon Rate = 5%
Face Value = $1,000
Annual Coupons
When you buy the bond the market interest rate...

Bond E has the following
features:
Face value =
$1,000, Coupon Rate =
4%,
Maturity = 5 years, Yearly coupons
The market
interest rate is 3.55%
If interest rate remains at 3.55% for the life of the bond
(i.e., 3.55 years), what is the price of Bond E in year 4?

Bond A has the following features:
Face value =
$1,000,
Coupon Rate = 8%,
Maturity = 10 years, Yearly coupons
The market
interest rate is 4.84%
If interest
rates remain at 4.84%, what will the price of bond A be in year
1?

3-
Bond A has the following features:
Face value =
$1,000,
Coupon Rate = 4%,
Maturity = 10 years, Yearly coupons
The market
interest rate is 4.6%
What is today’s price of bond A?

5- Bond A has the following features:
Face value =
$1,000,
Coupon Rate = 8%,
Maturity = 9 years, Yearly coupons
The market
interest rate is 5.05%
If interest
rates remain at 5.05%, what will the price of bond A be in year
1?

Bond A has the
following features:
Face value =
$1,000,
Coupon Rate =
5%,
Maturity = 10 years,
Yearly coupons
The market
interest rate is 6.30%
What is the current
yield for bond A from today to year 1?
Calculate your answer
to 2 decimal places (e.g., 5.23)

A.
You own a bond with the following features:
Face value of $1000, Coupon rate of 5% (annual) 8 years to
maturity. The bond is callable after 4 years with the call price of
$1,058.
If the market interest rate is 4.17% in 4 years when the bond
can be called, if the firm calls the bond, how much will it save or
lose by calling the bond? State your answer to the nearest penny
(e.g., 84.25). If there...

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