Question

Consider a 2-year Treasury bond with a face value of $100 and that pays coupons at a rate of 6% semiannually. What is the price of the bond given the following Treasury zero rates?

Maturity (years) Zero rates

0.5 3.0%

1.0 3.3%

1.5 3.6%

2.0 3.9%

a) $97.93

b) $99.97

c) $103.97

d) $108.93

Answer #1

**NOTE: Please note that all zero rates provided are on an
annualized basis and need to be divided by two for a 6-month
period.**

Face Value = $ 100, Coupon Rate = 6 % per annum payable semi-annually

Semi-Annual Coupon Payment = 0.06 x 100 x 0.5 = $ 3

0.5 year discount rate = (3/2) = 1.5 %, 1 year discount rate = (3.3/2) = 1.65 %, 1.5 year discount rate = (3.6/2) = 1.8 % and 2 year discount rate = (3.9/2) = 1.95 %

Therefore, Current Bond Price = 3 / (1.015) + 3 / (1.0165)^(2) + 3 / (1.018)^(3) + 103 / (1.0195)^(4) = $ 104.046 ~ $ 103.97

Hence, tne cprrect option is **(c)**

Suppose that a two-year bond with a principal of $100 provides
coupons at the rate of 6% per annum semiannually.
Suppose that the zero-rates are
Maturity (years)
Zero Rate (%)
0.5
5.0
1.0
5.8
1.5
6.4
2.0
6.8
What is the current theoretical price of the bond?
****Please show steps in a financial calculator****
Answer options are:
$98.39
102.45
97.23
101.27
99.81

A Treasury bond with two yeas until maturity has a par value of
$100 and pays semiannual coupons at a rate of 4% per annum. Given
the zero rates below, determine the market price of the bond.
Par
Maturity (years)
Annual Coupon
Price
100
0.5
0
98
100
1
4
99

3- Suppose that a two-year bond with a principal of $100
provides coupons at the rate of 6% per annum semiannually. Suppose
that the zero-rates are
Maturity (years)
Zero Rate (%)
0.5
5.0
1.0
5.8
1.5
6.4
2.0
6.8
What is the bond's yield to maturity expressed with the
continuous compounding?
Answer choices:
6.76%, 5.3%, 6.54%, 7.05%. Please show how to do this
exercise with a financial calculator
Please show how to do this

A Treasury bond with a par value of $100 pays semiannual coupons
at a rate of 5% per annum, has three years until maturity, and is
currently priced at $98. Determine the bond’s continuously
compounded yield.

A bond with $1000 face value, 6% of coupon rate, coupons are
paid semiannually, 20 years of maturity, the YTM is 5%.
What is the price of the bond
If the risk free rate goes up by 0.5%, what will be the price
of the bond.
If you know that the firm will call the bond at the end of year
10, for a value of $1200, what will be the current price?

bond has $1,000 face value, 25 years to maturity, 3.6% annual
coupon rate. The bond’s current price is $948.92. Assuming the bond
pays coupons semiannually, what is the bond’s yield to maturity
(YTM)?

A Treasury bond has a face value of $10,000, a coupon of 8%, and
several years to maturity. Currently this bond sells for $9,260,
and the previous coupon has just been paid. What is the forward
price for delivery of this bond in 1 year? Assume that the interest
rates for 1 year out are flat at 9% semiannually compounded. The T
Bond pays coupons semi-annually. If the forward is trading in the
market for $9,500 what will you do?

A
bond pays 10 coupons of $100 each and has a face value of $1000.
The interest rate is 0.01.
What is the Bond Value?

Consider a 2-year bond with a principal of $100 that provides
coupons at the rate of 3.6% per annum semiannually. Suppose the
yield on this bond is 5.8% per annum with continuous
compounding.
(a) What is the duration of this bond?
(b) Suppose the yield on this bond decreases by 0.1%.
Calculate the new bond price exactly.
Estimate the new bond price approximately using duration.

HW9 #6)
Bond A pays annual coupons, pays its next coupon in 1 year,
matures in 12 years, and has a face value of 1,000 dollars. Bond B
pays semi-annual coupons, pays its next coupon in 6 months, matures
in 13 years, and has a face value of 1,000 dollars. The two bonds
have the same yield-to-maturity. Bond A has a coupon rate of 8.46
percent and is priced at 836.24 dollars. Bond B has a coupon rate
of 7.72...

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