1. more,than coupon bonds of the same maturity.
Duration is the measure of bond's volatility due to change in interest rate. Duration of Zero coupon bonds always to its maturity and Duration of Coupon Bonds always less than its maturity which means Zero coupon bonds would have higher duration (volatility) than coupon bonds if both bonds have same maturity.
2.
Please refer to below spreadsheet for calculation and answer. Cell reference also provided.
Cell reference -
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When interest rates shift, the price of zero coupon bonds are volatile Multiple Choice more; if...
SLdtus QUESTION 1 Because short-ter m interest rates are much more volatile than long-term rates, you would, in the real world, generally be subject to True QUESTION 2 is a multiple of $1,000. The issuer wil make payments of 6% of A 20-year bond with a 6% coupon rate can have a par the par value each year, generally with one-half of the annual amount paid each 6 months. Bonds may include a si that some of the bonds must...
6) Which of the following statements about bonds is true? A) If market interest rates are above a bond's coupon interest rate, then the bond will sell below its par value. B) As the maturity date of a bond approaches, the market value of a bond will become more volatile. C) Bond prices move in the same direction as market interest rates. D) Long-term bonds have less interest rate risk than do short-term bonds.
The duration of a coupon bond is: Multiple Choice Ο equal to its number of payments. Ο less than that of a zero coupon bond of equal maturity. less than that of a Ο equal to the zero coupon bond of the same maturity. Ο equal to its maturity. Ο increases as the time to maturity decreases. Assume a bond matures in 2 years, has a coupon rate of 6 percent, pays interest annually, and has a face value of...
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Consider three bonds with 5.80% coupon rates, all making annual coupon payments and all selling at face value. The short-term bond has a maturity of 4 years, the intermediate-term bond has a maturity of 8 years, and the long-term bond has a maturity of 30 years, a. What will be the price of the 4-year bond if its yield increases to 6.80%? (Do not round intermediate calculations. Round your answer to 2 decimal places.) b. What will be the price...
Which one of the following bonds is the least sensitive to interest rate risk? Multiple Choice a. 3-year; 4 percent coupon b. 3-year; 6 percent coupon c. 5-year; 6 percent coupon d. 7-year; 6 percent coupon e. 7-year; 4 percent coupon New Homes has a bond issue with a coupon rate of 5.5 percent that matures in 8.5 years. The bonds have a par value of $1,000 and a market price of $1,022. Interest is paid semiannually. What is the...
e carrying value of bonds at maturity always equals. Multiple Choice O the amount in excess of par value. O the amount of cash originally received in exchange for the bonds. O the amount of discount or premium O the amount of cash originally received in exchange for the bonds plus any unamortized discount or less any premium. O the par value of the bond. < Prev 1 of 2 Next > Multiple Choice o The contract rate is above...
The current yield curve for default-free zero-coupon bonds is as follows: Maturity (years) YTM 1 9.5 % 2 10.5 3 11.5 a. What are the implied one-year forward rates? (Do not round intermediate calculations. Round your answers to 2 decimal places.) Maturity (years) YTM Forward Rate 1 9.5 % 2 10.5 % % 3 11.5 % % b. Assume that the pure expectations hypothesis of the term structure is correct. If market expectations are accurate, what will the pure yield...
3. You have a zero coupon bond that pays $100 in two more years. Its price is $69.44. You also have a 5% coupon bond with a principal of $100. The spot rate for 1 year is r = 5%. (a) What is the spot rate for 2 years, ra? (b) What is the price of the coupon bond? (c) Make a graph to show the term structure of interest rates. 4. Compute the yield to maturity for the two...
Which of the following statements is CORRECT? Question 14 options: 10-year, zero coupon bonds have more reinvestment risk than 10-year, 10% coupon bonds. A 10-year, 10% coupon bond has less reinvestment risk than a 10-year, 5% coupon bond (assuming all else equal). The total (rate of) return on a bond during a given year is the sum of the coupon interest payments received during the year and the change in the value of the bond from the beginning to the...