Question

Consider a bond with the following characteristics today (Year 0):

Face Value=$1,000

Coupon Rate=4%

Interest Rate=5%

Time to maturity=13 years

What is the total yield in Year 4?

Answer #1

Value of Bond =

Where r is the discounting rate of a compounding period i.e. 5%

And n is the no of Compounding periods 13

Coupon 4%

=

= 375.74291952 + 530.3213506

= 906.06

**Value of Bond after 4 years**

Value of Bond =

Where r is the discounting rate of a compounding period i.e. 5%

And n is the no of Compounding periods 9

Coupon 4%

=

= 284.312867048 + 644.60891619

= 928.921783238

Total yield = Coupon * 4 years + Capital Gain

= 40 * 4 + (928.921783238 - 906.06)

= 182.86

Yield % = 182.86 / 906.06

= 20.18%

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)

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?

A 10-year bond has a face value of $1,000 with a 5% per annum
coupon rate. The bond pays coupons semi-annually. The current yield
to maturity of the bond is 4% per annum. After 5 years, the yield
to maturity of the bond is predicted to increase to 6% per annum,
what would be the value of the bond in Year 5?

7.
A) As with most bonds, consider a bond with a face value of
$1,000. The bond's maturity is 27 years, the coupon rate is 14%
paid annually, and the market yield (discount rate) is 5%. What
should be the estimated value of this bond in one year? Assume the
market yield remains unchanged. Enter your answer in terms of
dollars, rounded to the nearest cent.
B) As with most bonds, consider a bond with a face value of
$1,000....

What is the price of a
5-year,
8.2%
coupon rate,
$1,000
face value bond that pays interest annually if the yield to
maturity on similar bonds is
7.2%?

What is the price of a 4-year, 8% coupon rate, $1,000 face
value bond that pays interest quarterly if the yield to maturity on
similar bonds is 11.9%?

A 12-year, 5% coupon bond pays interest annually. The bond has a
face value of $1,000 and selling for $916. What is the yield to
maturity of this bond?

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?

You bought a 10-year zero-coupon bond with a face value of
$1,000 and a yield to maturity of 2.7% (EAR). You keep the bond for
5 years before selling it. The price of the bond today is P 0 = F (
1 + r ) T = 1,000 1.027 10 = 766.12
If the yield to maturity is still 2.7% when you sell the bond at
the end of year-5, what is your personal ANNUAL rate of return?

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?

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