The following information will be used for the next 7 questions: An investor is considering investing in a 4 year, 8% coupon bon (semi-annual) that has a par value of $100. The yield on this bond is 10%, continuously compounded. Calculate the bond duration (to 3 decimal places). Take all previous calculations to 3 decimal places to ensure accuracy
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The following information will be used for the next 7 questions: An investor is considering investing...
An investor is considering purchasing a bond with a 7.83 percent coupon interest rate, a par value of $1,000, and a market price of $870.83. The bond will mature in nine years. Based on this information, answer the following questions: a. What is the bond's current yield? b. What is the bond's approximate yield to maturity? c. What is the bond's yield to maturity using a financial calculator? Note: Assume coupon payments are paid annually a. The bond's current yield...
1. An investor purchases an annual coupon bond with a 6% coupon rate and exactly 20 years remaining until maturity at a price equal to par value. The investor’s investment horizon is eight years. The approximate modified duration of the bond is 11.470 years. What is the duration gap at the time of purchase? (Hint: use approximate Macaulay duration to calculate the duration gap) 2. An investor plans to retire in 10 years. As part of the retirement portfolio, the...
An investor is considering purchasing a bond with a 7.45 percent coupon interest rate, a par value of $1,000, and a market price of $1,033.31. The bond will mature in nine years. Based on this information, answer the followingquestions: a. What is the bond's current yield? b. What is the bond's approximate yield to maturity? c. What is the bond's yield to maturity using a financial calculator? Note: Assume coupon payments are paid annually a. The bond's current yield is...
An investor is considering purchasing a 20-year 7% coupon bond selling for $816 and a par value of $1,000. Calculate the interest on interest from the bond assuming that the semi-annual coupon payments can be reinvested at 4½% every six months.
Suppose that an investor with a 3-year investment horizon is considering buying an 8-year 6% coupon bond selling at par (semi-annual coupon payments). The investor expects that she can reinvest the coupin payments at an annual interest rate of 7% and that at the end of the investment horizon all bonds will be selling to offer a YTM of 9%. What is the (annualized) expected holding period return for this bond?
(C) An investor is investing in a bond with a 6-year maturity with 6% annual coupon at PAR. The investor plans to invest the bond for 4 years before selling it off. Assume further that in the following years interest rates follow a downtrend, so that the coupon received in year 1 is invested for three years at 4.5%; the coupon received in year 2 is reinvested for two years at 3%, and the coupon received in year 3 is...
a. An investor buys a 5 % annual coupon payment bond with three years to maturity. The bond has a yield-to-maturity of 9%. The par value is $1000. i. Determine the market price of the bond. (2 marks) ii. Calculate the bond's duration. (3 marks) b.A bond portfolio consists of the following three annual coupon payment bonds. Prices are per 100 of par value. Modified Duration Yield-to- Coupon (%) Bond Maturity Market (years) Price Maturity (%) (years) 5.23 7.98 Value...
1 point) Consider the continuously compounded yield curve y(T) 0.045 - 0.015e0."7. Consider a 2-year $ 1000 bond that's redeemable at par and pays semi-annual coupons at a rate of 42) 7%. (1) Determine the bond's purchase price. Purchase Price-$ (i) Determine the duration of the bond to 3 decimals. Duration Note: Use the purchase price to the closest cent in your duration calculation. years
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...
John Q. Investor purchased a semi-annual coupon-bearing Treasury at par. The duration was 17 years. Yield then rose 1% to 5.77%. Therefore, the price of the Treasury after the rate change is _____ %. (Express the price as a percentage of the face value. Round your answer to three places after the decimal. Just write the number and do NOT include the “%” sign ) Related formula: