Homework Answers
a) Yes. The price of the bond will be more than fair value in case the required yield on the bond is more than coupon rate provided by that bond.
b) Yes.
The price of the bond will be more than fair value in case the required yield on the bond is more than coupon rate provided by that bond.
c) The return after depends on the price of the bond and coupon rate. Price of the bond depend on the required rate of return. If in 2 years the required yield rises then she may earn negative return and vice versa
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3. Someone buys a 5 year government treasury bond at $Pt a. b. c. Can the...
A 5 year government treasury bond is bought at $P a. Explain under what circumstances the...
A 5 year government treasury bond is bought at $P a. Explain under what circumstances the purchase price be i. above face value ii. below face value iii. same as face value b. If the buyer wants to sell it after 2 years, will the buyer make a positive rate of return or negative rate of return? Explain. C. Assume that the bond pays 10% coupon rate, bought at $900, face value is $1000, and fetches a price of $850...
1. What is the relationship between real interest rate, nominal interest rate and inflation rate? 2....
1. What is the relationship between real interest rate, nominal interest rate and inflation rate? 2. What are the reasons for very high nominal interest rates in the 1980s? 3. Someone buys a 5 year government treasury bond at $P t a. Can the price be above face value? Why? b. Can the price be below face value? Why? c. If he/she wants to sell it after 2 years, will he/she makes a positive rate of return or negative rate...
QUESTION 3 A colleague of yours has a K100,000-00, 2 years treasury Bond maturing in 12 months, issued at a fixed coupo...
QUESTION 3 A colleague of yours has a K100,000-00, 2 years treasury Bond maturing in 12 months, issued at a fixed coupon of 10%, payable annually. He informs you that he has an urgent need of money and wants to sell you the Bond. What’s the maximum price you would offer assuming the yield on a 12 months treasury bill is currently at 12%? [04 Marks] Briefly discuss how you may be affected by inflation over the holding period...
mike wants to buy a U.S. government Treasury bond that has 12 years remaining until maturity....
mike wants to buy a U.S. government Treasury bond that has 12 years remaining until maturity. The coupon rate is 6% per year and is paid out semiannually. The face or par value of the bond is $100,000. The current yield-to-maturity (YTM) of this bond is 5%. Calculate (1) the current market price of this bond, and (2) the new price if the required YTM rises from 5% to 6% due to a market change in bond interest rates.
Can someone please help me, I am trying to find Face Value of Bond (FV), Effective...
Can someone please help me, I am trying to find Face Value of Bond (FV), Effective Annual Interest Rate (EAR), Yield to Maturity (YTM) if held to maturity and Total Return for Investment portfolio for the 6 month treasury below. Please show your work so that I can try to grasp this. Thank you 6-month Treasury Bill (GB6:GOV) Face Value of Bond (FV) $ ? Price $ 1.54 Yield 1.58% Asset Category: U.S. Treasury and U.S. Agency Securities Asset Classification" Cash...
An investor buys a discount bond today that promises a face value payout of $4,500 in...
An investor buys a discount bond today that promises a face value payout of $4,500 in exactly four years. The investor holds it for one year and then decides to sell it in a secondary market to a different investor. If the interest rate is 6%, what price does he sell it for? 3,460.66 3,555.0 3,778.29 3,899.85
QUESTION THREE a) A colleague of yours has a K100,000-00, 2 years treasury Bond matunng in...
QUESTION THREE a) A colleague of yours has a K100,000-00, 2 years treasury Bond matunng in ons, issued at a fixed coupon of 10%, payable annually. He informs you that he has an urgent need of money and wants to sell you the Bond. What's the maximum price you would offer assuming the yield on a 12 months treasury bill is currently at 12%? [4 Marks] Briefly discuss how you may be affected by inflation over the holding period to...
Suppose that for a price of $940 you purchase a 10-year Treasury bond that has a...
Suppose that for a price of $940 you purchase a 10-year Treasury bond that has a face value of $1,000 and a coupon rate of 3%. If you sell the bond one year later for $1,150, what was your rate of return for that one-year holding period? The rate of retum for the one-year holding period was % (Round your response to one docimal place)
A $1,000 United States Treasury bond with a maturity date 20 years from now and a...
A $1,000 United States Treasury bond with a maturity date 20 years from now and a coupon rate of 5 percent has a required rate of return of 5 percent. Calculate the value of the bond if annual interest rate payment are in force. Show your data inputs. Strip the bond into an interest only bond and a face value only bond. That is, create a bond that has only the present value of the interest payments and one that...
Suppose you purchase a 30-year Treasury bond with a 5% annual coupon, initially trading at par. In 10 years' time, the bond's yield to maturity has risen to 8% (EAR). (Assume $100 face value bond.) a. If you sell the bond now, what internal rate of ret
Suppose you purchase a 30-year Treasury bond with a 5% annual coupon, initially trading at par. In 10 years' time, the bond's yield to maturity has risen to 8% (EAR). (Assume $100 face value bond.)a. If you sell the bond now, what internal rate of return will you have earned on your investment in the bond?b. If instead you hold the bond to maturity, what internal rate of return will you earn on your initial investment in the bond?c. Is comparing the IRRs in (a) versus (b)...
A 5 year government treasury bond is bought at $P a. Explain under what circumstances the purchase price be i. above face value ii. below face value iii. same as face value b. If the buyer wants to sell it after 2 years, will the buyer make a positive rate of return or negative rate of return? Explain. C. Assume that the bond pays 10% coupon rate, bought at $900, face value is $1000, and fetches a price of $850...
mike wants to buy a U.S. government Treasury bond that has 12 years remaining until maturity. The coupon rate is 6% per year and is paid out semiannually. The face or par value of the bond is $100,000. The current yield-to-maturity (YTM) of this bond is 5%. Calculate (1) the current market price of this bond, and (2) the new price if the required YTM rises from 5% to 6% due to a market change in bond interest rates.
QUESTION THREE a) A colleague of yours has a K100,000-00, 2 years treasury Bond matunng in ons, issued at a fixed coupon of 10%, payable annually. He informs you that he has an urgent need of money and wants to sell you the Bond. What's the maximum price you would offer assuming the yield on a 12 months treasury bill is currently at 12%? [4 Marks] Briefly discuss how you may be affected by inflation over the holding period to...
Suppose that for a price of $940 you purchase a 10-year Treasury bond that has a face value of $1,000 and a coupon rate of 3%. If you sell the bond one year later for $1,150, what was your rate of return for that one-year holding period? The rate of retum for the one-year holding period was % (Round your response to one docimal place)
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