Homework Answers
| Redemption Amt/Face Value | 100 | ||||
| Formula | Yield To Maturity=(Face Value/Current Bond Price)^(1/Years To Maturity)−1 | ||||
| Coupon rate (%) | Term to Maturity (years) | Price ($) | Years to Maturity | ||
| 1 year ZCB | 2 year ZCB | 3 year ZCB | |||
| 1 | 2 | 3 | |||
| 6 | 2 | 97.36 | 2.71% | 1.35% | 0.90% |
| 6 | 3 | 94.97 | 5.30% | 2.61% | 1.74% |
| 10 | 3 | 105.36 | -5.09% | -2.58% | -1.73% |
| Calculation : Effective rate of interest of 1 year ZCB = (100/97.36)^(1/1)-1 = 2.71% | |||||
| Likewise for the rest | |||||
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Question 10 (10 Points): You are given the following bond prices for bonds with annual coupons...
The table below lists maturities, coupons and prices for three bonds. All bonds have the same...
The table below lists maturities, coupons and prices for three bonds. All bonds have the same default risk and a face value of 100. Bond Maturity Coupon Price A 3 6% 94 B 2 5% 98 C 2 3% 94.5 a) What is the yield to maturity of a two-year zero-coupon bond? b) What is the price of a one-year zero-coupon bond with a face value of 100? c) What is the implied one-year forward rate for the period between...
1. The following table summarizes prices of various default-free, zero-coupon bonds (expressed as a percentage of...
1. The following table summarizes prices of various default-free, zero-coupon bonds (expressed as a percentage of face value): Maturity (years) Price (per $100 face value) $95.51 9105 $86.38 $81.65 $76.51 (a) Compute the yield to maturity for each bond. (b) Plot the zero-coupon yield curve (for the first five years). (c) Is the yield curve upward sloping, downward sloping, or flat? 2. Suppose a seven-year, $1000 bond with an 8% coupon rate and semiannual coupons is trading with a yield...
Bond A has the following terms (assume annual coupons) coupon rate 10% principal $1000 term to...
Bond A has the following terms (assume annual coupons) coupon rate 10% principal $1000 term to maturity 8 years Bond B has the following terms coupon rate 5% principal $1000 term to maturity 8 years What is the price of bond A if interest rates are 10%?
please answer all questions 1. A bond has face value 500 and coupon rate 4%. Coupons...
please answer all questions
1. A bond has face value 500 and coupon rate 4%. Coupons are paid every 6 months, and the redemption amount is the face value. Find the price if the yield rate and time to maturity are a. 5% and 2 years b. 3% and 2 years c. 5% and 15 years d. 3% and 15 years Note the coupon and yield rates are nominal annual interest rates compounded twice a year.
The function s(t) = 0.055 + 0.008t gives the effective annual rate of a zero coupon...
The function s(t) = 0.055 + 0.008t gives the effective annual rate of a zero coupon bond of maturity t, with t in years. Find the price of a 2 year coupon bond with semiannual coupons of 6% and a face/redemption value of $400,000.
You observe the following Treasury bills and bond prices available in Saudi Arabia Bond/Bill
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(20pts) 5. The term structure of interest rates for zero-coupon bonds with $100 face value is...
(20pts) 5. The term structure of interest rates for zero-coupon bonds with $100 face value is shown below: Maturity 1 year 2 years 3 years YTM Price 4.60% 2 4.80% 2 5.00% 2 (5pts) (a) Find the current price of the zero-coupon bonds. (15pts) (b) Consider a three-year coupon bond with a $2000 face value that pays 10% annual coupons. Show that the price of this three-year bond must be equal to a portfolio of the above zero-coupon bonds. What...
Question #5: Bond Pricing [16 Points Calculate the prices of the following bonds (16 Points; 8...
Question #5: Bond Pricing [16 Points Calculate the prices of the following bonds (16 Points; 8 Points each] (a) A 14 year $1000 face value coupon bond that pays an coupon rate of 4.6%. The YTM = 3.2%. Assume that the coupon payments are paid semi-annually, (b) A 14 year $1000 face value coupon bond that pays an coupon rate of 4.6%. The YTM = 3.2% Assume that the coupon payments are paid annually. Question #6: Bond Pricing and Accrued...
Consider two bonds: bond XY and bond ZW . Bond XY has a face value of $1,000 and 10 years to maturity and has just been...
Consider two bonds: bond XY and bond ZW . Bond XY has a face value of $1,000 and 10 years to maturity and has just been issued at par. It bears the current market interest rate of 7% (i.e. this is the yield to maturity for this bond). Bond ZW was issued 5 years ago when interest rates were much higher. Bond ZW has face value of $1,000 and pays a 13% coupon rate. When issued, this bond had a...
Question 9. [19 points) PART A. Consider the following spot rates on 1-year zero-coupon bonds: Year...
Question 9. [19 points) PART A. Consider the following spot rates on 1-year zero-coupon bonds: Year Spot Rates (or Yields to Maturity) 1 2 3 8.0% 8.5% 9.0% 9.5% 4 a. What is the equilibrium price of a 4-year, 9% coupon bond paying a principal of $100 at maturity and coupons annually? Question 9. [19 points] PART A. Consider the following spot rates on 1-year zero-coupon bonds: Year Spot Rates (or Yields to Maturity) 1 2 3 4 8.0% 8.5%...
1. The following table summarizes prices of various default-free, zero-coupon bonds (expressed as a percentage of face value): Maturity (years) Price (per $100 face value) $95.51 9105 $86.38 $81.65 $76.51 (a) Compute the yield to maturity for each bond. (b) Plot the zero-coupon yield curve (for the first five years). (c) Is the yield curve upward sloping, downward sloping, or flat? 2. Suppose a seven-year, $1000 bond with an 8% coupon rate and semiannual coupons is trading with a yield...
please answer all questions
1. A bond has face value 500 and coupon rate 4%. Coupons are paid every 6 months, and the redemption amount is the face value. Find the price if the yield rate and time to maturity are a. 5% and 2 years b. 3% and 2 years c. 5% and 15 years d. 3% and 15 years Note the coupon and yield rates are nominal annual interest rates compounded twice a year.
The function s(t) = 0.055 + 0.008t gives the effective annual rate of a zero coupon bond of maturity t, with t in years. Find the price of a 2 year coupon bond with semiannual coupons of 6% and a face/redemption value of $400,000.
(20pts) 5. The term structure of interest rates for zero-coupon bonds with $100 face value is shown below: Maturity 1 year 2 years 3 years YTM Price 4.60% 2 4.80% 2 5.00% 2 (5pts) (a) Find the current price of the zero-coupon bonds. (15pts) (b) Consider a three-year coupon bond with a $2000 face value that pays 10% annual coupons. Show that the price of this three-year bond must be equal to a portfolio of the above zero-coupon bonds. What...
Question #5: Bond Pricing [16 Points Calculate the prices of the following bonds (16 Points; 8 Points each] (a) A 14 year $1000 face value coupon bond that pays an coupon rate of 4.6%. The YTM = 3.2%. Assume that the coupon payments are paid semi-annually, (b) A 14 year $1000 face value coupon bond that pays an coupon rate of 4.6%. The YTM = 3.2% Assume that the coupon payments are paid annually. Question #6: Bond Pricing and Accrued...
Question 9. [19 points) PART A. Consider the following spot rates on 1-year zero-coupon bonds: Year Spot Rates (or Yields to Maturity) 1 2 3 8.0% 8.5% 9.0% 9.5% 4 a. What is the equilibrium price of a 4-year, 9% coupon bond paying a principal of $100 at maturity and coupons annually? Question 9. [19 points] PART A. Consider the following spot rates on 1-year zero-coupon bonds: Year Spot Rates (or Yields to Maturity) 1 2 3 4 8.0% 8.5%...
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