Question

Pricing bonds with spot rates: A four-year default-free annual-pay coupon bond is priced at 100 percent...

Pricing bonds with spot rates:

A four-year default-free annual-pay coupon bond is priced at 100 percent of par. What is its coupon (in percent of par) if annual spot rates are as follows:

r1 = 1.83%, r2 = 2.24%, r3 = 2.38%, r4 = 2.47%

Carry intermediate calcs. to four decimals. Answer to two decimals.

Business   Finance   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
A.) Consider the following spot interest rates for maturities of one, two, three, and four years....
A.) Consider the following spot interest rates for maturities of one, two, three, and four years.            r1 = 5.3%    r2 = 5.9%     r3 = 6.6%     r4 = 7.4% What are the following forward rates, where f1, k refers to a forward rate for the period beginning in one year and extending for k years? (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places.) B,) Consider the following spot interest rates for maturities...
Consider the following spot interest rates for maturities of one, two, three, and four years.    r1...
Consider the following spot interest rates for maturities of one, two, three, and four years.    r1 = 4.6%    r2 = 5.2%     r3 = 5.9%     r4 = 6.7% Assuming a constant real interest rate of 2 percent, what are the approximate expected inflation rates for the next four years? (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places.)
Consider the following spot interest rates for maturities of one, two, three, and four years.            r1...
Consider the following spot interest rates for maturities of one, two, three, and four years.            r1 = 3.9%    r2 = 4.5%     r3 = 5.2%     r4 = 6.0% What are the following forward rates, where f1, k refers to a forward rate for the period beginning in one year and extending for k years? (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places. Omit the "%" sign in your response.)   f1,1 %   f1,2 %...
Bond Pricing Suppose you have a 7% annual coupon bond selling for $950 with three years...
Bond Pricing Suppose you have a 7% annual coupon bond selling for $950 with three years until maturity and face value equal to $1,000. Furthermore, suppose the interest rates in the next three years are known (with certainty) to be r1 = 8%, r2 = 10.5% and r3 = 13%. What is the bond’s current yield? Calculate the bond’s yield to maturity. What is the holding period return on your initial investment after the bond matures? What is the bond’s...
Suppose a 2 year 5% (annual coupon) bonds are selling at par (that is, for $100...
Suppose a 2 year 5% (annual coupon) bonds are selling at par (that is, for $100 of face value, the price is equal to $100) and 1 year zero coupon bonds has a yield to maturity of 7%. (a) What are the 1-year and 2-year interest rates, r1 and r2, respectively? (b) What should be the price of a two year 8% coupon bond with a face value of $100? (c) What are the Durations of 5% coupon bonds and...
Consider the following risk-free T-bill and coupon bonds available for sale in the bond market (annual...
Consider the following risk-free T-bill and coupon bonds available for sale in the bond market (annual coupons): Maturity Price Coupon 1 942 T-bill 2 995 6.3% 3 998 7.5% 4 985.25 6.75% Construct the term structure of interest rates (you have enough information to find four rates). Your company plans to issue four-year maturity bonds. You plan to issue these bonds priced at $1010. At what level should you plan to set the coupon on your bonds to justify this...
1.A 12-year bond has a 9 percent annual coupon, a yield to maturity of 11.4 percent,...
1.A 12-year bond has a 9 percent annual coupon, a yield to maturity of 11.4 percent, and a face value of $1,000. What is the price of the bond? 2.You just purchased a $1,000 par value, 9-year, 7 percent annual coupon bond that pays interest on a semiannual basis. The bond sells for $920. What is the bond’s nominal yield to maturity? a.         7.28% b.         8.28% c.         9.60% d.         8.67% e.         4.13% f.          None of the above 3.A bond with...
Bonds are priced per $100 face value 1) Consider a 10-year 6 percent coupon bond. a)...
Bonds are priced per $100 face value 1) Consider a 10-year 6 percent coupon bond. a) What is the price of this bond if the market yield is 6%? b) What is the price of this bond if the market yield is 7%? c) What is the price of this bond if the market yield is 5%? 2) Consider a 20-year 6 percent coupon bond. a) What is the price of this bond if the market yield is 6%? b)...
Chapter 6 13. Consider the following bonds: Bond Coupon Rate (annual payments) Maturity (years) A 0%...
Chapter 6 13. Consider the following bonds: Bond Coupon Rate (annual payments) Maturity (years) A 0% 15 B 0% 10 C 4% 15 D 8% 10 What is the percentage change in the price of each bond if its yield to maturity falls from 6% to 5%? Which of the bonds A–D is most sensitive to a 1% drop in interest rates from 6% to 5% and why? Which bond is least sensitive? Provide an intuitive explanation for your answer....
1. A Treasury bond has a 10% annual coupon and a 10.5% yield to maturity. Which...
1. A Treasury bond has a 10% annual coupon and a 10.5% yield to maturity. Which of the following statements is CORRECT? * a. The bond sells at a price below par. b. The bond has a current yield less than 10%. c. The bond sells at a discount. d. a & c. e. None of the above 2. J&J Company's bonds mature in 10 years, have a par value of $1,000, and make an annual coupon interest payment of...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT