Question

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 fourth year.
**(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 | ||

Maturity (years) | Price of Bond | ||

2 | 916.47 | ||

3 | 834.12 | ||

4 | 766.39 | ||

Answer #1

**Answer
:**

**a) Here, we have that,**

Sl.
No. |
Maturity
years |
Calculation |
YTM |

i) | One year | [ 1000 / 955.90 ] - 1 |
4.61% |

ii) | Two years | [ 1000 / 916.47 ]^(1/2) - 1 |
4.46% |

iii) | Three years | [ 1000 / 834.12 ]^(1/3) - 1 |
6.23% |

iv) | Four years | [ 1000 / 766.39 ]^(1/4) - 1 |
6.88% |

**b) Here, we have that,**

Sl.
No. |
Maturity
years |
Calculation |
Forward
Rate |

i) | Second year | ( 1 + 4.46% )^2 / ( 1 + 4.61%) - 1 |
4.31% |

ii) | Third year | ( 1 + 6.23% )^3 / ( 1 + 4.46% )^2 - 1 |
9.86% |

iii) | Fourth year | ( 1 + 6.88% )^4 / ( 1 + 6.23% )^3 - 1 |
8.85% |

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. 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
___%
____%

Suppose that the prices of zero-coupon bonds with various
maturities are given in the following table. The face value of each
bond is $1,000.
Maturity
(Years)
Price
1
$
974.68
2
903.39
3
842.92
4
783.00
5
669.92
a. Calculate the forward rate of interest for
each year. (Round your answers to 2 decimal
places.)
Maturity (years)
Forward rate
2
%
3
%
4
%
5
%
b. How could you construct a 1-year forward
loan beginning in year 3?...

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...

Suppose that the prices today of zero-coupon bonds with various
maturities are in the following table. The face value of every bond
is $1,000.
Maturity in years
Price
1
925.93
2
853.39
3
782.92
4
715.00
5
650.00
Calculate the one-year forward rate of interest for every
year.
Suppose that today you buy one 3-year maturity zero coupon bond.
How many 5-year maturity zeros would you have to sell to make
What are the cash flows from the strategy in...

Calculate the forward rate for (i) the second year; (ii) the
third year; (iii) the fourth year. Assume annual coupon payments.
(Do not round intermediate calculations. Round your answers
to 2 decimal places.)
Maturity (years)
Price of Bond
1
$
935.90
2
906.47
3
837.12
4
775.39

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?

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

a. Assuming that the expectations hypothesis is
valid, compute the price of the four-year bond shown below at the
end of (i) the first year; (ii) the second year; (iii) the third
year; (iv) the fourth year. (Do not round intermediate
calculations. Round your answers to 2 decimal places.)
Beginning of Year
Price of Bond
Expected Price
1
$948.40
2
$921.47
3
$832.62
4
$781.99
b. What is the rate of return of the bond in
years 1, 2, 3,...

Prices of zero-coupon bonds reveal the following pattern of
forward rates:
Year
Forward Rate
1
8
%
2
11
3
13
In addition to the zero-coupon bond, investors also may purchase a
3-year bond making annual payments of $55 with par value
$1,000.
a. What is the price of the coupon bond?
(Do not round intermediate calculations. Round your answer
to 2 decimal places.)
b. What is the yield to maturity of the coupon
bond? (Do not round intermediate calculations....

ADVERTISEMENT

Get Answers For Free

Most questions answered within 1 hours.

ADVERTISEMENT

asked 3 minutes ago

asked 3 minutes ago

asked 9 minutes ago

asked 11 minutes ago

asked 21 minutes ago

asked 29 minutes ago

asked 34 minutes ago

asked 35 minutes ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago