Homework Answers
CAT bonds i.e, catastrophe bonds are used to raise money by the companies in the insurance industry in the event of any natural disaster such as Earthquake ,tornado etc
This bond provides diversification of market risk also because natural disasters are not related with market .Therefore an added advantage of using this bond in portfolio is diversification of systematic risk also which is not so in the case of B rated bonds.
Therefore,I would suggest to buy CAT bond.
Add Answer to:
Problem 3. Consider two bonds that have the same coupon, time to maturity and price. One...
Consider two bonds. The first is a 6% coupon bond with six years to maturity, and...
Consider two bonds. The first is a 6% coupon bond with six years to maturity, and a yield to maturity of 4.5% annual rate, compounded semi-annually. The second bond is a 2% coupon bond with six years to maturity and a yield to maturity of 5.0%, annual rate, compounded semi-annually. 1. Calculate the current price per $100 of face value of each bond. (You may use financial calculator to do question 1 and 2, I'm just unsure how to use...
Given the following information relating to the yields to maturity on several one- year, zero-coupon bonds:...
Given the following information relating to the yields to maturity on several one- year, zero-coupon bonds: Bond Yield (%) US Treasury 3.0 AAA Corporate 3.3 A Corporate 3.9 BB Corporate 4.8 a. Find the price of a one-year, zero-coupon corporate bond with a AAA rating. b. Find the credit spread on the AAA-rated corporate bonds. c. Find the credit spread on the A-rated corporate bonds. d. Find the credit spread on the BB-rated corporate bonds. e. In what way does...
Two bonds have identical times to maturity and coupon rates. One is callable at 105, the...
Two bonds have identical times to maturity and coupon rates. One is callable at 105, the other at 110. Which should sell at a higher price? The bond callable at 105 The bond callable at 110 Both bonds should sell at the same price Do not have enough information to answer this question
1. Two 5 year corporate Bonds (A and B) have the same credit quality and coupon...
1. Two 5 year corporate Bonds (A and B) have the same credit quality and coupon rate, but bond A is more liquid than bond B. Which bond should have a higher yield to maturity/ interest rate? 2. Diversification helps reduce risk. Hence if we keep adding stocks to our portfolio, the risk of the portfolio will eventually decrease to zero. (True or False)
Given that two bonds have the same maturity, yield to maturity and different coupon rate, which...
Given that two bonds have the same maturity, yield to maturity and different coupon rate, which of the following is true? Is it A.The high coupon bond will be sold for premium. B. The lower coupon bond will be sold for premium. C.The high coupon bond will have higher interest rate risk., D.The low coupon rate bond will have higher interest rate risk.?
Question 11 (1 point) Two bonds have identical times to maturity and coupon rates. One is...
Question 11 (1 point) Two bonds have identical times to maturity and coupon rates. One is callable at 102, the other bond is callable at 101(101% and 102% of par, of course). Which bond should have the higher yield to maturity (ytm)? 1) the bond that is callable at 102 will have the higher ytm 2) the bond that is callable at 101 will have the higher ytm 3) it is impossible to determine from the information provided 4) both...
The following table summarizes the yields to maturity on several one-year, zero coupon securities: Security yield...
The following table summarizes the yields to maturity on several one-year, zero coupon securities: Security yield Treasury 3.15 AAA corporate 3.23 BBB corporate 4.27 B corporate 4.94 A. What is the price(expressed as a percentage of the face value) of a one-year, zero-coupon corporate bond with a AAA rating? B. What is the credit spread on AAA-rated corporate bonds? C. What is the credit spread on B-rated coporate bonds? D. How does this credit spread change with the bond rating?...
Consider two bonds with the same call features. One bears a premium coupon and the other...
Consider two bonds with the same call features. One bears a premium coupon and the other a discount coupon. Explain how effective durations would be different between the two bonds. Why is there a difference?
The Law of One Price implies that financial instruments with the same risk and the same...
The Law of One Price implies that financial instruments with the same risk and the same cash flows at the same time should have the same price. You are given the following table containing incomplete information on four different bonds. Assume that all these bonds have the same risk, and any coupon payments are paid annually. Once calculations are done please fill the table Bond # 1 2 3 4 1 year strip bond 2 year strip bond 2 year...
6. Bond Valuation A BBB-rated corporate bond has a yield to maturity of 9%. AU.S. Treasury...
6. Bond Valuation A BBB-rated corporate bond has a yield to maturity of 9%. AU.S. Treasury security has a yield to maturity of 7.5% These yields are quoted as APRS with semiannual compounding. Both bonds pay semiannual coupons at an annual rate of 8.4% and have five years to maturity a. What is the price (expressed as a percentage of the face value) of the Treasury bond? b. What is the price (expressed as a percentage of the face value)...
Two bonds have identical times to maturity and coupon rates. One is callable at 105, the other at 110. Which should sell at a higher price? The bond callable at 105 The bond callable at 110 Both bonds should sell at the same price Do not have enough information to answer this question
Question 11 (1 point) Two bonds have identical times to maturity and coupon rates. One is callable at 102, the other bond is callable at 101(101% and 102% of par, of course). Which bond should have the higher yield to maturity (ytm)? 1) the bond that is callable at 102 will have the higher ytm 2) the bond that is callable at 101 will have the higher ytm 3) it is impossible to determine from the information provided 4) both...
6. Bond Valuation A BBB-rated corporate bond has a yield to maturity of 9%. AU.S. Treasury security has a yield to maturity of 7.5% These yields are quoted as APRS with semiannual compounding. Both bonds pay semiannual coupons at an annual rate of 8.4% and have five years to maturity a. What is the price (expressed as a percentage of the face value) of the Treasury bond? b. What is the price (expressed as a percentage of the face value)...
Most questions answered within 3 hours.
-
Given a regression sum of squares equal to 2373.59 and a total
sum of squares equal...
asked 1 hour ago -
Compare and contrast the linear motion and angular motion
equations F ma and . That is,...
asked 36 minutes ago -
Now that this course has taken you on a journey of introduction
to the world of...
asked 1 hour ago -
The sandwich maker of the EE-Cole-Eye Sandwich Truck was just
fired (for a reason described below)...
asked 3 hours ago -
Name the following coordination compounds using systematic
nomenclature.
1. [Co(H2O)6]Cl2:
2. [Cr(NH3)6](NO3)3:
3. K4[Fe(CN)6]:
4. Na[Au(CN)4]:...
asked 3 hours ago -
Propose an efficient synthesis of 2-Bromo-5-nitrotoluene from
benzene. Hint: 3 steps. Consider directing effects of substituents....
asked 5 hours ago -
This assignment will explore the impact of corporate decisions
on a local versus a global perspective....
asked 4 hours ago -
Given the function below, F(w,x,y,z)= x’z+w’z’+w’y
a) draw a logic diagram for an implementation which uses...
asked 3 hours ago -
Most political philosophers believe we have a duty to obey laws,
even if the laws in...
asked 4 hours ago -
Which of the following are common negotiation outcome
mistakes?
a. Leave money on the table b....
asked 5 hours ago -
Convert the following quantities:
a) 0.819 atm to torr b) 512 mmHg to bar c) 11.2...
asked 5 hours ago -
C ++ Implement cat command
The purpose of this assignment is to provide practice using the...
asked 5 hours ago