Which would you prefer?
A) A 4% annual yield on a credit risk-free 10-year government bond from the mythical country of Utopia
B) a 3% annual yield on a credit risk-free 10-year government bond from the mythical country of Utopia
C) A 2% annual yield on an investment in 10-year U.S. government bonds
D) A 3% annual yield on an investment in 10-year U.S. government bonds
The correct answer is option a i.e. we will prefer A 4% annual yield on a credit risk-free 10-year government bond from the mythical country of Utopia
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Which would you prefer? A) A 4% annual yield on a credit risk-free 10-year government bond...
A five-year 2.4% defaultable coupon bond is selling to yield 3% (Annual Percent Rate and semi-annual compounding). The bond pays interest semi-annually. The risk-free yield is 2.4%. Therefore, its current credit spread is 3% -2.4% = 0.6%. Two years later its credit spread increases from 0.6% to 1% while the risk-free yield doesn’t change. Assuming the face value of the coupon bond and risk-free bond is 100. a)What is the return of investing in this bond over the two year?...
a) The price of a 4-year zero coupon government bond is 79.81. What is the yield to maturity (effective annual yield) on the 4-year bond? b) The price of a 3-year zero coupon government bond is 85.16. What is the yield to maturity (effective annual yield) on the 3-year bond? The prices of 1, 2, 3, and 4-year zero coupon government bonds are 95.42, 90.36, 85.16, and 79.81, respectively. What is the implied 2-year forward rate between years 2 and...
Bond A has a 10-year maturity, a 4,5% semi-annual coupon and a yield of 8%. Bond B has a 10 year maturity, a 4.5% semi-annual coupon and a yield of 6%. What must be true about the two bonds? A. Bond A must have greater liquidity risk B. Bond B has greater default risk C. Bond Bhas greater interest-rate risk O D. Bond A must be more valuable
A five-year 2.4% defaultable coupon bond is selling to yield 3% (Annual Percent Rate and semi-annual compounding). The bond pays interest semi-annually. The risk-free yield is 2.4%. Therefore, its current credit spread is 3% -2.4% = 0.6%. Two years later its credit spread increases from 0.6% to 1% while the risk-free yield doesn’t change. Assuming the face value of the coupon bond and risk-free bond is 100.a)What is the return of investing in this bond over the two year? (10...
Suppose the current, zero-coupon, yield curve for risk-free bonds is as follows:Maturity (years)12345Yield to Maturity4.75%5.07%5.35%5.73%6.02%a. What is the price per $100 face value of a 3-year, zero-coupon risk-free bond?b. What is the price per $100 face value of a 5-year, zero-coupon, risk-free bond?c. What is the risk-free interest rate for a 4-year maturity?Note: Assume annual compounding.
A five-year 2.4% defaultable coupon bond is selling to yield 3% (Annual Percent Rate and semi-annual compounding). The bond pays interest semi-annually. The risk-free yield is 2.4%. Therefore, its current credit spread is 3% -2.4% = 0.6%. Two years later its credit spread increases from 0.6% to 1% while the risk-free yield doesn’t change. Assuming the face value of the coupon bond and risk-free bond is 100. a)What is the return of investing in this bond over the two year?
3) Consider a 5-year risk-free bond with annual coupons of 6% and a face value of $1,000. a) If this bond is currently priced at $1,068.94, what is its yield to maturity? b) If the yield to maturity on this bond increased to 5.2%, what would be the new price?
Suppose that you want to invest risk free over a 10 year period. Also suppose you believe that the U.S. is AAA and suppose you invest in a 10-year T-Bond. Is this a risk free investment? a. Yes. Because there is no default risk. b.Yes. Because there is no reinvestment risk. c. No.
Question 11: a) The price of a 4-year zero coupon government bond is 79.81. What is the yield to maturity (effective annual yield) on the 4-year bond? b) The price of a 3-year zero coupon government bond is 85.16. What is the yield to maturity (effective annual yield) on the 3-year bond? c) The prices of 1, 2, 3, and 4-year zero coupon government bonds are 95.42, 90.36, 85.16, and 79.81, respectively. What is the implied 2-year forward rate between...
Suppose that a 15-year $1000-face value government (risk-free) coupon bond with 8% coupon payments (paid annually) is currently selling at par. ABC Company’s bonds are rated AA, and the credit spread on these bonds is 3%. At what price would you be willing to purchase a 15-year ABC Company bond with a $1000-face value if it offers 8% coupon payments (paid annually)? Show your calculations and explain your result.