Slice & Dice Investment Co. - zero coupon bonds that have no risk of default
The Slice & Dice Investment Co. needs some help understanding the intricacies of bond pricing. It has observed the following prices for zero coupon bonds that have no risk of default:
| Maturity | Price per $1 Face Value |
| 1 year | $0.97 |
| 2 years | 0.90 |
| 3 years | 0.81 |
How much should Slice & Dice be willing to pay for a three-year bond that pays a 6-percent coupon, assuming annual coupon payments start one year from now?
What is the yield to maturity of the three-year coupon bond?
Suppose Slice & Dice purchases this coupon bond and then “un-bundles” it into its four component cash flows: three coupon payments and the par value amount. At what price(s) can Slice & Dice resell each of the first three cash flows (the coupon payments) today?
The remaining cash flow (the face value amount) is a “synthetic” three-year, zero coupon bond. How much must this “strip bond” be sold for if Slice & Dice is to break even on the investment?
What is the yield to maturity on the synthetic three-year, zero coupon bond?
Thank you.
Homework Answers
Request Answer!
We need at least 9 more requests to produce the answer.
1 / 10 have requested this problem solution
The more requests, the faster the answer.
Add Answer to:
Slice & Dice Investment Co. - zero coupon bonds that have no risk of default
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...
Consider two bonds. The first is a 6% coupon bond with six years to maturity, and...
Consider two bonds. The first is a 6% coupon bond with six years to maturity, and a yield to maturity of 4.5% annual rate, compounded semi-annually. The second bond is a 2% coupon bond with six years to maturity and a yield to maturity of 5.0%, annual rate, compounded semi-annually. 1. Calculate the current price per $100 of face value of each bond. (You may use financial calculator to do question 1 and 2, I'm just unsure how to use...
Corporate Finance Assume zero-coupon yields on default-free securities are as summarized in the following table: Maturity...
Corporate Finance Assume zero-coupon yields on default-free securities are as summarized in the following table: Maturity (years) 1 2 3 4 5 Zero-coupon YTMn 4.00% 4.30% 4.50% 4.70% 4.80% 1. What is the price of a three-year, default-free security with a face value of $1000 and an annual coupon rate of 4%? What is the yield to maturity for this bond? 2. Consider a four-year, default-free security with annual coupon payments and a face value of $1000 that is issued at par....
Please solve this question! Suppose the current, zero-coupon, yield curve for risk-free bonds is as follows:...
Please solve this
question!
Suppose the current, zero-coupon, yield curve for risk-free bonds is as follows: Maturity (years) 4 Yield to Maturity 4.46% 4.82% 5.03% 5.1 8% 5.45% a. What is the price per $100 face value of a 3-year, zero-coupon risk-free bond? b. What is the price per $100 face value of a 5-year, zero-coupon, risk-free bond? c. What is the risk-free interest rate for a 1-year maturity? Note: Assume annual compounding. a. What is the price per $100...
The current zero-coupon yield curve for risk-free bonds is as follows: Maturity (years) YTM 4.99% 5.79%...
The current zero-coupon yield curve for risk-free bonds is as follows: Maturity (years) YTM 4.99% 5.79% 5.99% 6.03% What is the price per $100 face value of a four-year, zero-coupon, risk-free bond? The price per $100 face value of the four-year, zero-coupon, risk-free bond is $ . (Round to the nearest cent.) The current zero-coupon yield curve for risk-free bonds is as follows: Maturity (years) YTM - 5.54% 4.99% 5.54% 5.97% 6.06% What is the risk-free interest rate for a...
A.Zero Coupon Bonds A 7 year maturity zero coupon corporate bond has an 8% promised yield....
A.Zero Coupon Bonds A 7 year maturity zero coupon corporate bond has an 8% promised yield. The bond's price should equal B.The Fishing Pier has 6.40 percent, semi-annual bonds outstanding that mature in 12 years. The bonds have a face value of $1,000 and a market value of $1,027. What is the yield to maturity? C.Bond Yields Find the promised yield to maturity for a 7% coupon, $1,000 par 20 year bond selling at $1115.00. The bond makes semiannual coupon...
Suppose the current, zero-coupon, yield curve for risk-free bonds is as follows: Maturity (years) 1 2...
Suppose the current, zero-coupon, yield curve for risk-free bonds is as follows: Maturity (years) 1 2 3 4 5 Yield to Maturity 4.37% 4.71% 4.92% 5.28% 5.51% a. What is the price per $100 face value of a 3-year, zero-coupon risk-free bond? b. What is the price per $100 face value of a 5-year, zero-coupon, risk-free bond? c. What is the risk-free interest rate for a 4-year maturity? Note: Assume annual compounding. a. What is the price per $100 face...
Suppose the current, zero-coupon, yield curve for risk-free bonds is as follows: Maturity (years) 1 2...
Suppose the current, zero-coupon, yield curve for risk-free bonds is as follows: Maturity (years) 1 2 3 4 Yield to Maturity 4.13% 4.61% 4.86% 5.25% 5.62% a. What is the price per $100 face value of a 3-year, zero-coupon risk-free bond? b. What is the price per $100 face value of a 4-year, zero-coupon, risk-free bond? c. What is the risk-free interest rate for a 2-year maturity? Note: Assume annual compounding. a. What is the price per $100 face value...
plz show steps Using zero coupon bonds You know the information on three bonds that make...
plz show steps
Using zero coupon bonds You know the information on three bonds that make annual coupon payments, if any. Bond Maturity 1) What are the prices of bonds A and B? Face value $1,000 $1,000 $1,000 tinin mo-NM Coupon rate 0.00% 0.00% 10.00% Yield to maturity 5.00% 5.85% 2) What are the zero-coupon bond yields for 1-year bond and 2-year bond? с 3) What is the price of bond C? 4) What is the yield of bond C?
The following table summarizes prices of various default-free zero-coupon bonds (expressed as a percentage of face value...
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) | 1 | 2 | 3 | 4 | 5 94.52 89.68 85.40 81.65 78.35 The yield to maturity for the four-year zero-coupon bond is closest to _ a 0.18% Ob. 10.40% Oc. 2.60% Od. 22.47% Oe.5.20%
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 solve this
question!
Suppose the current, zero-coupon, yield curve for risk-free bonds is as follows: Maturity (years) 4 Yield to Maturity 4.46% 4.82% 5.03% 5.1 8% 5.45% a. What is the price per $100 face value of a 3-year, zero-coupon risk-free bond? b. What is the price per $100 face value of a 5-year, zero-coupon, risk-free bond? c. What is the risk-free interest rate for a 1-year maturity? Note: Assume annual compounding. a. What is the price per $100...
The current zero-coupon yield curve for risk-free bonds is as follows: Maturity (years) YTM 4.99% 5.79% 5.99% 6.03% What is the price per $100 face value of a four-year, zero-coupon, risk-free bond? The price per $100 face value of the four-year, zero-coupon, risk-free bond is $ . (Round to the nearest cent.) The current zero-coupon yield curve for risk-free bonds is as follows: Maturity (years) YTM - 5.54% 4.99% 5.54% 5.97% 6.06% What is the risk-free interest rate for a...
Suppose the current, zero-coupon, yield curve for risk-free bonds is as follows: Maturity (years) 1 2 3 4 5 Yield to Maturity 4.37% 4.71% 4.92% 5.28% 5.51% a. What is the price per $100 face value of a 3-year, zero-coupon risk-free bond? b. What is the price per $100 face value of a 5-year, zero-coupon, risk-free bond? c. What is the risk-free interest rate for a 4-year maturity? Note: Assume annual compounding. a. What is the price per $100 face...
Suppose the current, zero-coupon, yield curve for risk-free bonds is as follows: Maturity (years) 1 2 3 4 Yield to Maturity 4.13% 4.61% 4.86% 5.25% 5.62% a. What is the price per $100 face value of a 3-year, zero-coupon risk-free bond? b. What is the price per $100 face value of a 4-year, zero-coupon, risk-free bond? c. What is the risk-free interest rate for a 2-year maturity? Note: Assume annual compounding. a. What is the price per $100 face value...
plz show steps
Using zero coupon bonds You know the information on three bonds that make annual coupon payments, if any. Bond Maturity 1) What are the prices of bonds A and B? Face value $1,000 $1,000 $1,000 tinin mo-NM Coupon rate 0.00% 0.00% 10.00% Yield to maturity 5.00% 5.85% 2) What are the zero-coupon bond yields for 1-year bond and 2-year bond? с 3) What is the price of bond C? 4) What is the yield of bond C?
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) | 1 | 2 | 3 | 4 | 5 94.52 89.68 85.40 81.65 78.35 The yield to maturity for the four-year zero-coupon bond is closest to _ a 0.18% Ob. 10.40% Oc. 2.60% Od. 22.47% Oe.5.20%
Most questions answered within 3 hours.
-
Calculate the value of the translational partition function of
O2 at 300 K for a volume...
asked 14 minutes ago -
Consider the following tasks, times, and predecessors for an
assembly of set top cable converter boxes:...
asked 12 minutes ago -
10.________ is the proportion of variance in the dependent
variable that is accounted for by the...
asked 25 minutes ago -
Find at least three implicit modelling assumptions or other
qualitative factors which are relevant but not...
asked 26 minutes ago -
Write a method that determines the key of the successor of the
root node in a...
asked 40 minutes ago -
Determine the lattice energy (in kJ/mol) of NaF(s),
using the data provided.
Energy to sublime Na(s)...
asked 48 minutes ago -
How do you explain the deviations from Hardy-Weinberg
equilibrium in a population where smoking has effected...
asked 58 minutes ago -
As a general rule, testing should be conducted until all bugs
have been detected.
A. True....
asked 1 hour ago -
Just before a referendum on a school budget, a local newspaper
polls
436
voters to predict...
asked 1 hour ago -
3) Consider the combustion reaction for octane (C8H18), which is
a primary component of gasoline.
2C8H18+25O2⟶16CO2+18H2O...
asked 1 hour ago -
A protein molecule in an electrophoresis gel has a negative
charge. The exact charge depends on...
asked 1 hour ago -
we have seen the development of e-commerce in the last 20 years
, what do you...
asked 1 hour ago