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Answer:
g)
True as the PV of the bonds sold in the market includes accrued interest on the bond
h)
Yes, as Coupon rate = YTM, the bond's face value will be equal to the face value
i)
True as
j)
True as
A coupon paying bond will always have its duration less than its time to maturity. And Macualy diration is the weighted sum of cash flows hence will be less than the term of the bond
True or False: g. The price of a bond in between coupons payments includes the interest...
4. Both Bond A and Bond B have 6% coupons, make semiannual payments, and are priced at par value. Bond A has three years to maturity, whereas Bond B has 20 years to maturity. If the interest rates suddenly rise by 2 percent point to 8%, what is the percentage change in the price of Bond A and Bond B? If rates were to suddenly fall by 2 percent points to 4% instead, what would be the percentage change in...
The below bond is traded at yield 5.2 % and has seven (7) years to maturity. The face value is $1000 and coupons are paid semi-annually. Bond Coupon Rate A 6.00% Table 01 (a) Calculate the price of the bond. (3 marks) (b) Calculate the duration of the bond. (5 marks) (C) Due to unforeseen circumstances, the last payment will be postponed to two years later. All other payments have no change. Calculate the new price and duration of the...
Consider a 3-year risk-free bond, which pays annual coupons. The coupon rate is 3.5% and the face value is 500. The bond is issued at time t=0, pays coupons at time t=1,2,3 and face value at time t=3. You purchase the bond at time t=0. While holding the bond, you do not reinvest the coupon payments. What is the future value, at time t=2, of the coupon payments you received if you held the bond from t=0 to maturity? What...
1. (15 points) Consider a 12%-coupon bond with a face value on of 2 years. The bond pays coupons annually, so there are bond with a face value of $1,000 and a remaining maturity wally, so there are two remaining payments. a. (9 points) What is the duration of the bond if the yield-to-mac if the yield-to-maturity is 10%?
4) Suppose there is a 3-year bond with a $1000 face value, 30% annual coupon payments and a 20% annual yield to maturity. a) Without any calculation, briefly explain whether this bond will be selling a premium or a discount b) Calculate the price of this bond. c Calculate the duration of this bond. d) Suppose the interest rates in the economy rise by 5 percentage points immediately after someone bought this bond. Show a calculation using duration for what...
4) Suppose there is a 3-year bond with a $1000 face value, 30% annual coupon payments and a 20% annual yield to maturity. a) Without any calculation, briefly explain whether this bond will be selling a premium or a discount. b) Calculate the price of this bond. c) Calculate the duration of this bond. d) Suppose the interest rates in the economy rise by 5 percentage points immediately after someone bought this bond. Show a calculation using duration for what...
4.Which one of the following statements about the approach to bond pricing is NOT true? Select one: A. To calculate a bond's price, one needs to calculate the present value of the bond's expected cash flows. B. The value, or price, of any asset is the future value of its cash flows. 6.Which one of the following statements is NOT true? Select one: A. The yield to maturity of a bond is the discount rate that makes the present value...
1. Suppose a five-year, $ 1,000 bond with annual coupons has a price of $ 903.98 and a yield to maturity of 5.7 %. What is the bond's coupon rate? The bond's coupon rate is ........... % ( Round to three decimal places.) 2. Suppose that General Motors Acceptance Corporation issued a bond with 10 years until maturity, a face value of $ 1,000 and a coupon rate of 7.7 % (annual payments). The yield to maturity on this bond...
Consider a bond with the following characteristics. Par: $1,000 Two coupon payments per year (i.e., coupons are paid semi-annually) Coupon rate: 4.00% Years to maturity: 8 Bond price: $1,000 Suppose that the annual market interest rate for this bond drops by 1%. What is the new bond price? Note: recall that the annual yield-to-maturity (YTM) is the market interest rate on the bond. $1,070.66 $1,000.00 $934.72
please explain the ans clearly, thanks (a) Are the following statements true or false? Briefly explain your answer. i) “The duration of a zero-coupon bond equals its time to maturity.” ii) Holding maturity constant, a bond's duration is lower when the coupon rate is higher.” iii) “Holding other factors constant, the duration of a coupon bond is higher when the bond's yield to maturity is lower.” (12 marks) (b) “It is not possible to forecast stock returns in an efficient...