Question 9. [19 points) PART A. Consider the following spot rates on 1-year zero-coupon bonds: Year...
6. Spot rates of interest for zero-coupon Government of Canada bonds are observed for different terms to maturity as follows: 1-year spot rate 4% 2-year spot rate 4.5% 3-year spot rate 5% A 3-year bond has a face value of $1,000 and a coupon rate of 7%. It pays coupons annually. What is its value today? (3 marks)
Question 1 What is the price of a zero-coupon 21-year maturity bond per face (par) value of $1,000 if the annual market rates for these bonds are 8%? Question 2 What is the price of a 17-year bond paying 8.8% annual coupons with a face (par) value of $1,000 if the market rates for these bonds are 6.8%? Question 3 What is the price of a 14-year bond paying an annual coupon rate of 9.4%, but paying it semiannually, per...
15.5 The yield to maturity on 1-year zero-coupon bonds is currently 7.5%; the YTM on 2-year zeros is 8.5%. The Treasury plans to issue a 2-year maturity coupon bond, paying coupons once per year with a coupon rate of 9.5%. The face value of the bond is $100. a. At what price will the bond sell? (Do not round intermediate calculations. Round your answer to 2 decimal places.) b. What will the yield to maturity on the bond be? (Do...
1. The following table provides zero coupon bond yields. Maturity Bond equivalent yield 6 months 6% 1 year 8% A 12% coupon bond with coupons paid semiannually matures in one year. The par value of the bond is $1,000. What is the price of this bond? [First identify the cash flows.] A. $1,030 B. $1,032 C. $1,034 D. $1,038 2. The following are the prices of zero coupon bonds. Par value is $1,000 in each case. Maturity Price 6 months...
Prices of zero-coupon bonds reveal the following pattern of forward rates: Year Forward Rate points In addition to the zero-coupon bond, investors also may purchase a 3-year bond making annual payments of $45 with par value $1,000 eBock a. What is the price of the coupon bond? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Print Priceſ References b. What is the yield to maturity of the coupon bond? (Do not round Intermediate calculations. Round your...
Prices of zero-coupon bonds reveal the following pattern of forward rates: Year Forward Rate points In addition to the zero-coupon bond, investors also may purchase a 3-year bond making annual payments of $45 with par value $1,000 eBock a. What is the price of the coupon bond? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Print Priceſ References b. What is the yield to maturity of the coupon bond? (Do not round Intermediate calculations. Round your...
Debt & Bonds 1. The table below presents the spot rates an investor faces. Year Spot Rate 1 2% 2 3% 3 4% 4 5% Assume that, for each maturity, there is a zero-coupon bond traded in the market. These zeros pay $1,000 at their respective maturity. a. Is the term structure positive, inverted, or flat? b. What is the forward rate from t=1 to t=2? c. Suppose that the investor is expecting to receive $1 million at t=1. This...
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...
Prices of zero-coupon bonds reveal the following pattern of forward rates: Year Forward Rate 6% In addition to the zero-coupon bond, investors also may purchase a 3-year bond making annual payments of $60 with par value $1,000. a. What is the price of the coupon bond? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Price b. What is the yield to maturity of the coupon bond? (Do not round intermediate calculations. Round your answer to 2...
The yield to maturity on 1-year zero-coupon bonds is currently 7%; the YTM on 2-year zeros is 8%. The Government plans to issue a 2-year maturity coupon bond, paying coupons once per year with a coupon rate of 9%. The face value of the bond is $100. a. At what price will the bond sell? b. What will the yield to maturity on the bond be? (Hint: Use a financial calculator to get the YTM) c. If the expectations theory...