Duration is a calculation used to identify risk that is inherent in a bond issued by...
Duration is a calculation used to identify risk that is inherent in a bond issued by a company and takes into account the present value of the time weighted coupons and face value of the bond?
Homework Answers
The statement is false as the duration is only concerned about interest rate risk and not default risk of a company
Add Answer to:
Duration is a calculation used to identify risk that is inherent
in a bond issued by...
Consider a 3-year risk-free bond, which pays annual coupons. The coupon rate is 3.5% and the...
Consider a 3-year risk-free bond, which pays annual coupons. The coupon rate is 3.5% and the face value is 500. The bond is issued at time t=0, pays coupons at time t=1,2,3 and face value at time t=3. You purchase the bond at time t=0. While holding the bond, you do not reinvest the coupon payments. What is the future value, at time t=2, of the coupon payments you received if you held the bond from t=0 to maturity? What...
roduce a table showing bond values and interest rate risk over the duration of a bond...
roduce a table showing bond values and interest rate risk over the duration of a bond and a diagram demonstrating the link between interest rate risk and time to maturity. The bond has a face value of $1,000, pays a coupon rate of 9% and is issued with 10 years to maturity. All calculations should be executed in excel. Your table should show the following: The value of the bond, year by year, from date of issue until its...
Consider a 3-year risk-free bond, which pays annual coupons. The coupon rate is 3.5% and the...
Consider a 3-year risk-free bond, which pays annual coupons. The coupon rate is 3.5% and the face value is 500. The bond is issued at time t=0, pays coupons at time t=1,2,3 and face value at time t=3. You purchase the bond at time t=0. While holding the bond, you do not reinvest the coupon payments. You resell the bond in one year, after getting the first coupon payment. The yield to maturity when you sell is 3.6%. What is...
A bond has just been issued. The bond has an annual coupon rate of 9% and...
A bond has just been issued. The bond has an annual coupon rate of 9% and coupons are paid annually. The bond has a face value of $1,000 and will mature in 10 years. The bond’s yield to maturity is 12%. e. Calculate the bond’s duration at a yield to maturity of 10.5%. f. Use the bond’s duration to calculate the approximate bond price change as the yield to maturity changes from 12% to 10.5%. g. Use the bond’s modified...
A bond has just been issued. The bond has an annual coupon rate of 9% and...
A bond has just been issued. The bond has an annual coupon rate of 9% and coupons are paid annually. The bond has a face value of $1,000 and will mature in 10 years. The bond’s yield to maturity is 12%. Calculate the price of the bond at the yield to maturity of 12%. Calculate a new price for the bond if the yield to maturity decreases to 10.5%. Calculate the actual change in the bond’s price as the yield...
The US government just issued a bond with a $10,000 face value and a coupon rate...
The US government just issued a bond with a $10,000 face value and a coupon rate of 4%. If the bond has a life of 25 years, pays semi-annual coupons, and the yield to maturity is 3%, what is the present value of the bond? Show the values for the buttons that you have pushed.
Calculate the duration for a 2-year bond which has a 8% annual coupon rate, and coupons...
Calculate the duration for a 2-year bond which has a 8% annual coupon rate, and coupons are paid semiannually. The yield to maturity is 6% and the face value of the bond is $1000.
Calculate the duration for a 2-year bond which has a 8% annual coupon rate, and coupons...
Calculate the duration for a 2-year bond which has a 8% annual coupon rate, and coupons are paid semiannually. The yield to maturity is 6% and the face value of the bond is $1000.
b) Consider a risk-free bond. “Macaulay duration is a weighted average of the times to payment...
b) Consider a risk-free bond. “Macaulay duration is a weighted average of the times to payment of a bond's cashflows and therefore is a natural measure of a bond's interest rate risk.” Assess this statement, paying particular attention to why times to cashflow are important for the determination of interest rate risk and why the particular mathematical form of the duration measure is the right way to measure such risk.
Calculate duration on a ten-year, $1,000 face-value, 10% coupon bond when its yield to maturity is...
Calculate duration on a ten-year, $1,000 face-value, 10% coupon bond when its yield to maturity is 20%. Show all of your work in a table showing cash payments, present value of cash payments and weighted maturity of those cash payments.
b) Consider a risk-free bond. “Macaulay duration is a weighted average of the times to payment of a bond's cashflows and therefore is a natural measure of a bond's interest rate risk.” Assess this statement, paying particular attention to why times to cashflow are important for the determination of interest rate risk and why the particular mathematical form of the duration measure is the right way to measure such risk.
Calculate duration on a ten-year, $1,000 face-value, 10% coupon bond when its yield to maturity is 20%. Show all of your work in a table showing cash payments, present value of cash payments and weighted maturity of those cash payments.
Most questions answered within 3 hours.
-
An empty test tube weighs 15.923 grams. Then,
MgCl2•6H2O is added into the test tube. After...
asked 33 minutes ago -
Please answer true or false. Words
cannot be changed or added in to make it true...
asked 32 minutes ago -
(a) A piston at 6.1 atm contains a gas that occupies a volume of
3.5 L....
asked 33 minutes ago -
Assume memory access is 10 units of time and disk access is
10000 units of time....
asked 52 minutes ago -
1. Are all good samples random?
2. Magazines often report surveys giving statistics such as “63%...
asked 1 hour ago -
Under all the various types of market structures, firms
must eventually earn some economic profits for...
asked 59 minutes ago -
Consider the following fitness regime for a single locus trait
with two co-dominant alleles: w11 =...
asked 1 hour ago -
A large cable company reports the following.
80% of its customers subscribe to its cable TV...
asked 1 hour ago -
Please answer the question in brief.
Discuss the role of ERP in organizations. Are ERP tools...
asked 1 hour ago -
Discuss the pros and cons of collaborative software such
as SameTime. Does it increase productivity? What...
asked 1 hour ago -
Buying your in-laws a gift because it’s expected is
due to the ____________ motive of gift-giving....
asked 1 hour ago -
Calculate the expected value, the variance, and the standard
deviation of the given random variable X....
asked 2 hours ago