Bond Duration would be used to measure the % change in market price due to change in market interest rate | ||||
Lets suppose face value of zero coupon bond is 1000 | ||||
Maculay's duration of zero coupon bonds is always equals to maturity period so in this case maculay's duration is 10 years | ||||
Modified duration of zero coupon bond | Maculay's duration/(1+YTM) | YTM =5% Maculay's duration duration = 10 Years | 10/(1.05) | 9.52 |
% change in price | -Modified duration*change in interest rate | -9.52% | ||
Price of zero coupon bond =face value/(1+r)^n face value =1000 r =5% n =10 | 1000/(1.05)^10 | 613.9133 | ||
Change in price | current price*(1-% change in price) | 613.91*(1-.0952) | 555.47 |
3. (13 points) Consider a 10 year zero coupon bond trading at a price to produce...
Question Find the equilavent years to maturity ofa zero-coupon bond to one that has a coupon rate of 8.60%, 5 years to maturity and a yield to maturity of 9.20% Find the equilavent years to maturity of a zero-coupon bond to one that has a coupon rate of 660% (annual coupons) 10 years to maturity, and a yield to maturity 3 of 6.00%. Find the approximate percentage change in the price of a bond due to a 10 basis point...
Question 23 (Mandatory) (0.5 points) Calculate the price of a zero coupon bond that matures in 10 years if the market interest rate is 6 percent. (Assume semi-annual compounding and $1,000 par value.) O $553.68 $558.66 O $940.00 O $1,000.00 Question 24 (Mandatory) (0.5 points) What's the current yield of an 8.15 percent coupon corporate bond quoted at a price of 94.30? 08.64 percent 8.15 percent 8.01 percent 4.30 percent Question 25 (Mandatory) (0.5 points) Consider a 3.75 percent TIPS...
Question 3 Homework. Unanswered A 6-year zero-coupon bond has a face value of $1,000. If its YTM changes from 3.6% to 5.1%, what is the resulting percentage change in its price? Use the price determined from the first yield, 3.6%, as the base in the percentage calculation. Round to the nearest hundredth of a percent. (e.g., 4.32% = 4.32). (Hint: If the price dropped, enter a negative number]. Numeric Answer: Unanswered 2 attempts left Submit Question 4 Homework. Unanswered What...
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A) You are considering the purchase of a $1,000 par value bond with a coupon rate of 5% (with interest paid semiannually) that matures in 12 years. If the bond is priced to yield 9%, what is the bond's current price? The bond's current price is $__ B) Compute the current yield of a(n) 8.5%, 25-year bond that is currently priced in the market at $1,200. Use annual compounding to find the promised yield on this bond. Repeat the promised...
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L M Coupon Interest Rate, the bond is trading at discount Problem 13-09 Evaluate the following pure-yield pickup swap: You currently hold a 15-year, AA-rated, 9.5% coupon bond priced to yield 11.5%. As a swap candidate, you are considering a 15- year, AA-rated, 12.0% coupon bond priced to yield 12.5%. (Assume reinvestment at 12.5%, $1,000 par value, semiannual coupons.) Do not round intermediate calculations. Round your monetary answers to the nearest cent and percentage answers and value of swap to...
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