1a) Question: Suppose you observe the following zero-coupon bond prices per $1 of maturity payment: 0.96397 (1-year), 0.93538 (2-year), 0.92247 (3-year). Compute the 3-year continuously compounded zero-coupon bond yield.
Answers: a. 2.69% b. 4.50% c. 2.42% d. 1.40% e. 8.40%
3 years total return:
Hence, 3-year continuously compounded zero-coupon bond yield is 2.69% (8.07%/3)
1a) Question: Suppose you observe the following zero-coupon bond prices per $1 of maturity payment: 0.96397...
.1. You observe the following Treasury bills and bond prices available in Saudi Arabia Bond/Bill Bond/Bill principalTime to maturityAnnual couponBond price1000.25099.21000.50098.31000.75097.210016.2 (Quarterly payments)1021001.256.6 (Quarterly Payments)102.5a) Calculate continuously compounded zero rates for maturities of 3 months, 6 months, 9 months, 12 months and 15 months. b) Calculate the par yield for the following bonds: I. A 12-month bond that pays coupons semiannually. II. A 12-month bond that pays coupons quarterly. c) What is the continuously compounded yield on the coupon-paying bonds, which mature in 1 and...
Question 3 Suppose you observe the following market data on debt securities: Security Coupon (p.a.) Yield to maturity (p.a. continuously compounded) n.a. 2.00% 6-month Treasury Bond 1-year NZ Government Stock 10%, semi-annual 4.00% Note: Data deviates from the current market conditions as it simplifies the calculations. Required: (a) What are the continuously compounded zero-coupon yields for 6 months and one year, respectively? Report your answer in percentage (%) with 4 dps. (4 marks) (b) What is the duration of the...
Suppose that you observe the following prices of three zero-coupon bonds issued by the government: YTM (spot rate) Price 985.22 1-year zero-coupon bond X 2-year zero-coupon bond Y 3-year zero-coupon bond Z Face value 1,000 1,000 1,000 P2 4% 901.94 Questions: A. (4 pts) Draw a yield curve based on the above three zero-coupon bonds. Comment on the shape. B. (6 pts) Calculate the implied 1-year forward interest rate, two years from now (i.e. f2.a)
Question 1 A 12.58-year maturity zero-coupon bond selling at a yield to maturity of 8% (effective annual yield) has convexity of 146.5 and modified duration of 11.65 years. A 30-year maturity 6% coupon bond making annual coupon payments also selling at a yield to maturity of 8% has nearly identical modified duration—-11.79 years—-but considerably higher convexity of 231.2. a. Suppose the yield to maturity on both bonds increases to 9%. What will be the actual percentage capital loss on each...
You observe the following prices of zero-coupon bonds. Assume semi-annual compounding throughout. Time to Maturity in years Zero-Coupon Bond Price 0.5 99.009901 1 97.066175 1.5 94.928528 2 94.218423 2.5 90.573081 3 87.502427 Compute the 1-year forward rate in 2 years, i.e. compute f(0,2.0,3.0) Compute the 2-year forward rate in 6 months, i.e. compute f(0,0.5,2.5) Compute the 1.5-year forward rate in 1 year, i.e. compute f(0,1.0,2.5) Compute the 2.5-year forward rate in 6 months, i.e. compute f(0,0.5,3.0) Compute the 2-year forward...
Suppose that a 1-year zero-coupon bond with face value $100 currently sells at $93.27, while a 2-year zero sells at $83.53. You are considering the purchase of a 2-year-maturity bond making annual coupon payments. The face value of the bond is $100, and the coupon rate is 11% per year. a. What is the yield to maturity of the 2-year zero?(Do not round intermediate calculations. Round your answers to 3 decimal places.) Yield to Maturity 2-year zero b. What is...
Return to question A 12.25-year maturity zero-coupon bond selling at a yield to maturity of 8% (effective annual yield) has convexity of 1392 and modified duration of 11.34 years. A 40-year maturity 6% coupon bond making annual coupon payments also selling at a yield to maturity of 8% has nearly identical modified duration -12.30 years--but considerably higher convexity of 272.9. 1.25 points a. Suppose the yield to maturity on both bonds increases to 9% IWhat will be the actual percentage...
Question Find the equilavent years to maturity ofa zero-coupon bond to one that has a coupon rate of 8.60%, 5 years to maturity and a yield to maturity of 9.20% Find the equilavent years to maturity of a zero-coupon bond to one that has a coupon rate of 660% (annual coupons) 10 years to maturity, and a yield to maturity 3 of 6.00%. Find the approximate percentage change in the price of a bond due to a 10 basis point...
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...
Suppose that a 1-year zero-coupon bond with face value $100 currently sells at $88.99, while a 2-year zero sells at $76.99. You are considering the purchase of a 2-year-maturity bond making annual coupon payments. The face value of the bond is $100, and the coupon rate is 16% per year. a. What is the yield to maturity of the 2-year zero?(Do not round intermediate calculations. Round your answers to 3 decimal places.) Yield to Maturity 2-year zero 10 b. What...