Homework Answers
1, c) Bond A has lower reinvestment rate risk than Bond B
2, d) All the answers above
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Bond A has a 12% coupon and Bond B has an 8% coupon. Both bonds have...
Bond A has a 4% coupon. Bond B has a 10 percent coupon. Both bonds have...
Bond A has a 4% coupon. Bond B has a 10 percent coupon. Both bonds have 8 years to maturity, make annual payments, and have a YTM of 9 percent. If interest rates suddenly rise by 3 percent, what is the percentage price change in these bonds? What does this say about the interest rate risk of lower-coupon bonds? Please show the formulas you used.
Bond J has a coupon of 4 percent. Bond K has a coupon of 8 percent....
Bond J has a coupon of 4 percent. Bond K has a coupon of 8 percent. Both bonds have 10 years to maturity and have a YTM of 7 percent. a. If interest rates suddenly rise by 2 percent, what is the percentage price change of these bonds? (A negative value should be indicated by a minus sign. Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places.) b. If interest rates suddenly fall...
Both Bond A and Bond B have 7.8 percent coupons and are priced at par value. Bond A has 9 years to maturity, while...
Both Bond A and Bond B have 7.8 percent coupons and are priced at par value. Bond A has 9 years to maturity, while Bond B has 16 years to maturity a. If interest rates suddenly rise by 2.2 percent, what is the percentage change in price of Bond A and Bond B? (A negative value should be indicated by a minus sign. Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places.) Bond...
Bond J has a coupon of 4.2 percent. Bond K has a coupon of 8.2 percent....
Bond J has a coupon of 4.2 percent. Bond K has a coupon of 8.2 percent. Both bonds have 10 years to maturity and have a YTM of 6 percent. a. If interest rates suddenly rise by 1 percent, what is the percentage price change of these bonds? (A negative value should be indicated by a minus sign. Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places.) %A in Price Bond J Bond...
Bond J has a coupon of 6.8 percent. Bond K has a coupon of 10.8 percent....
Bond J has a coupon of 6.8 percent. Bond K has a coupon of 10.8 percent. Both bonds have 20 years to maturity and have a YTM of 7.1 percent. a. If interest rates suddenly rise by 1.4 percent, what is the percentage price change of these bonds? (A negative value should be indicated by a minus sign. Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places.) b. If interest rates suddenly fall...
Problem 10-18 Interest Rate Risk (LO3, CFA4) Bond J has a coupon of 4.6 percent. Bond...
Problem 10-18 Interest Rate Risk (LO3, CFA4) Bond J has a coupon of 4.6 percent. Bond K has a coupon of 8.6 percent. Both bonds have 10 years to maturity and have a YTM of 7.2 percent. b. If interest rates suddenly fall by 1.2 percent, what is the percentage price change of these bonds? (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places.) & Answer is complete but not entirely correct. Bond...
. Assume that a 10-year Treasury bond has a 12% annual coupon, while a 15-year T-bond...
. Assume that a 10-year Treasury bond has a 12% annual coupon, while a 15-year T-bond has an 8% annual coupon. Assume also that the yield curve is flat, and all Treasury securities have a 10% yield to maturity. Which of the following statements is CORRECT? a. If interest rates decline, the prices of both bonds will increase, but the 10-year bond would have a larger percentage increase in price. b. If interest rates decline, the prices of both bonds...
Term Answer Description Zero coupon bond This term is used for bonds that are secured by a specific asset that the bond...
Term Answer Description Zero coupon bond This term is used for bonds that are secured by a specific asset that the bond issuer owns. Equipment Trust Certificate This type of municipal bond is backed by the full faith and credit of the issuing municipality. The coupon payments are likely to paid by the taxes that the municipality collects. Sinking Fund This is a bond provision that specifies the annual repayment schedule that will be used to service the bond and...
Interest Rate Risk Laurel, Inc., and Hardy Corp. both have 5.8 percent coupon bonds outstanding, with...
Interest Rate Risk Laurel, Inc., and Hardy Corp. both have 5.8 percent coupon bonds outstanding, with semiannual interest payments, and both are priced at par value. The Laurel, Inc., bond has 3 years to maturity, whereas the Hardy Corp. bond has 20 years to maturity. If interest rates suddenly rise by 2 percent, what is the percentage change in the price of these bonds? If interest rates were to suddenly fall by 2 percent instead, what would the percentage change...
Problem 10-18 Interest Rate Risk (LO3, CFA4) Bond J has a coupon of 4.6 percent. Bond K has a coupon of 8.6 percent. Bo...
Problem 10-18 Interest Rate Risk (LO3, CFA4) Bond J has a coupon of 4.6 percent. Bond K has a coupon of 8.6 percent. Both bonds have 10 years to maturity and have a YTM of 7.2 percent. a. If interest rates suddenly rise by 1.2 percent, what is the percentage price change of these bonds? (A negative value should be indicated by a minus sign. Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal...
Both Bond A and Bond B have 7.8 percent coupons and are priced at par value. Bond A has 9 years to maturity, while Bond B has 16 years to maturity a. If interest rates suddenly rise by 2.2 percent, what is the percentage change in price of Bond A and Bond B? (A negative value should be indicated by a minus sign. Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places.) Bond...
Bond J has a coupon of 4.2 percent. Bond K has a coupon of 8.2 percent. Both bonds have 10 years to maturity and have a YTM of 6 percent. a. If interest rates suddenly rise by 1 percent, what is the percentage price change of these bonds? (A negative value should be indicated by a minus sign. Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places.) %A in Price Bond J Bond...
Problem 10-18 Interest Rate Risk (LO3, CFA4) Bond J has a coupon of 4.6 percent. Bond K has a coupon of 8.6 percent. Both bonds have 10 years to maturity and have a YTM of 7.2 percent. b. If interest rates suddenly fall by 1.2 percent, what is the percentage price change of these bonds? (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places.) & Answer is complete but not entirely correct. Bond...
Term Answer Description Zero coupon bond This term is used for bonds that are secured by a specific asset that the bond issuer owns. Equipment Trust Certificate This type of municipal bond is backed by the full faith and credit of the issuing municipality. The coupon payments are likely to paid by the taxes that the municipality collects. Sinking Fund This is a bond provision that specifies the annual repayment schedule that will be used to service the bond and...
Interest Rate Risk Laurel, Inc., and Hardy Corp. both have 5.8 percent coupon bonds outstanding, with semiannual interest payments, and both are priced at par value. The Laurel, Inc., bond has 3 years to maturity, whereas the Hardy Corp. bond has 20 years to maturity. If interest rates suddenly rise by 2 percent, what is the percentage change in the price of these bonds? If interest rates were to suddenly fall by 2 percent instead, what would the percentage change...
Problem 10-18 Interest Rate Risk (LO3, CFA4) Bond J has a coupon of 4.6 percent. Bond K has a coupon of 8.6 percent. Both bonds have 10 years to maturity and have a YTM of 7.2 percent. a. If interest rates suddenly rise by 1.2 percent, what is the percentage price change of these bonds? (A negative value should be indicated by a minus sign. Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal...
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