Homework Answers
As per rules I am answering the first 4 subparts of the question
a: Using financial calculator
Input: FV = 6000; PMT= 2%*1000 = 120 ; N = 5; I/Y = 4
Solve for PV as – 5465.78
Price of the bond = $5465.78
B: PV = -5200
Fv 6000
PMT = 2%*6000 = 120
N= 5
Solve for I/Y as 5.09. Hence the YTM = 5.09%
C: Current yield = Annual dividend/ Price
= 120/5200
= 2.31%
D: The YTM in b is greater than the current yield.
Add Answer to:
Assume the current market interest rate is 4% and will be used for all discounting. Consider a $6...
7.4 Unlike the coupon interest rate, which is fixed, a bond's yield varies from day to...
7.4
Unlike the coupon interest rate, which is fixed, a bond's yield varies from day to day depending on market conditions. To be most useful, it should give us an estimate of the rate of return an investor would earn if that investor purchased the bond today and held it for its remaining life. There are three different yield calculations: Current yield, yield to maturity, and yield to call. A bond's current yield is calculated as the annual interest payment...
2. The market price of a 4%, 10 year bond is $800. Determine the bond's Current...
2. The market price of a 4%, 10 year bond is $800. Determine the bond's Current Yield and yield to maturity (YTM.) (To calculate YTM without a financial calculator, use the following arithmetic formula, known as the Rodriguez Approximate YTM Model. It is very close to exact) (YTM) Bond Yield to Maturity = C + [(M-Pn [M + 2 (P)]/3 current Yield a good approximation of the YTM for this bond? Why?
Banks Management If a government bond is expected to mature in two years and has a current price of $950, what is the bond's YTM if it has a par value of $1,000 and a promised coupon rate of 10 percent? Suppose this bond is sold one year after purchase
a. If a government bond is expected to mature in two years and has a current price of $950, what is the bond's YTM if it has a par value of $1,000 and a promised coupon rate of 10 percent?b. Suppose this bond is sold one year after purchase for a price of $970. What would this investor's holding period yield be?
1. (Holding Period Yield) A few years ago, XYZ Corp. issued a bond with a par...
1. (Holding Period Yield) A few years ago, XYZ Corp. issued a bond with a par value of $1000 and annual coupon rate of 7 percent paid SEMIANNUALLY (2 times per year). At present (time 0), the bond has 20 years to maturity. a. If the yield to maturity (YTM) on this bond is now 10 percent, what is the current price of the bond (at time 0)? In your answer, please indicate your entries: N = I/Y= FV =...
Calculation and Interpretation of traditional yield measures for fixed-rate bonds. Their assumptions and limitations. 1. Consider...
Calculation and Interpretation of traditional yield measures for fixed-rate bonds. Their assumptions and limitations. 1. Consider a 20-year, $1,000 par value, 6% semiannual-pay bond that is currently trading at $802.07. Calculate the current yield, the YTM, and the BEY 2. A bond with 5 years remaining until maturity is currently trading for 101 per 100 of par value. The bond offers a 6% coupon rate with interest paid semiannually. The bond is first callable in 3 years, and is callable...
Consider a 2-year $4000 bond that's redeemable at par and pays semi-annual coupons at a rate...
Consider a 2-year $4000 bond that's redeemable at par and pays semi-annual coupons at a rate of c2) 8%. 70. (a) Suppose that the yield rate is 4% compounded annually. Determine: The purchase price of the bond. P = $ %3D The bond's duration to 3 decimals. D: years %3| Note: Use the purchase price to the closest cent in your duration calculation. (b) Suppose that the yield rate is 4% compounded semi-annually. Determine: The purchase price of the bond....
5. Eleven years from now the bond will have 1 year until maturity. Assume market interest...
5. Eleven years from now the bond will have 1 year until maturity. Assume market interest rates are at 7 percent, the same place they were when the bond was issued. Given this: k. What will be the bond's price 11 years from now? 1. What will be the current yield eleven years from now? m. What is the expected capital gains yield eleven years from now? n. How does you answers to part (1) and (m) compare with your...
A $1,000 face value has a 4% annual coupon rate. The next coupon is due in...
A $1,000 face value has a 4% annual coupon rate. The next coupon is due in one year and the bond matures in 29 years. The current YTM on the bond is 4.1%. What is the dollar value of the price change if the bond's YTM increases to 6.4%? Round to the nearest cent. [Hint: 1) If the price drops, the change is a negative number. 2) Do not compute duration. You can calculate the precise impact of a yield...
Below is some useful material. A portfolio manager wants to estimate the interest rate risk of...
Below is some useful material.
A portfolio manager wants to estimate the interest rate risk of a bond using duration. The current price of the bond is 82. A valuation model found that if interest rates decline 30 basis points, the price will increase to 83.50 and if interest rates increase by 30 basis points, the price will decline to 80.75. What is the duration of this bond? [Read Attachment #1 before attempting.) Macaulay, Modified and Approximate Modified Durations Macaulay...
A) You are considering the purchase of a $1,000 par value bond with a coupon rate...
A) You are considering the purchase of a $1,000 par value bond with a coupon rate of 5% (with interest paid semiannually) that matures in 12 years. If the bond is priced to yield 9%, what is the bond's current price? The bond's current price is $__ B) Compute the current yield of a(n) 8.5%, 25-year bond that is currently priced in the market at $1,200. Use annual compounding to find the promised yield on this bond. Repeat the promised...
7.4
Unlike the coupon interest rate, which is fixed, a bond's yield varies from day to day depending on market conditions. To be most useful, it should give us an estimate of the rate of return an investor would earn if that investor purchased the bond today and held it for its remaining life. There are three different yield calculations: Current yield, yield to maturity, and yield to call. A bond's current yield is calculated as the annual interest payment...
2. The market price of a 4%, 10 year bond is $800. Determine the bond's Current Yield and yield to maturity (YTM.) (To calculate YTM without a financial calculator, use the following arithmetic formula, known as the Rodriguez Approximate YTM Model. It is very close to exact) (YTM) Bond Yield to Maturity = C + [(M-Pn [M + 2 (P)]/3 current Yield a good approximation of the YTM for this bond? Why?
1. (Holding Period Yield) A few years ago, XYZ Corp. issued a bond with a par value of $1000 and annual coupon rate of 7 percent paid SEMIANNUALLY (2 times per year). At present (time 0), the bond has 20 years to maturity. a. If the yield to maturity (YTM) on this bond is now 10 percent, what is the current price of the bond (at time 0)? In your answer, please indicate your entries: N = I/Y= FV =...
Calculation and Interpretation of traditional yield measures for fixed-rate bonds. Their assumptions and limitations. 1. Consider a 20-year, $1,000 par value, 6% semiannual-pay bond that is currently trading at $802.07. Calculate the current yield, the YTM, and the BEY 2. A bond with 5 years remaining until maturity is currently trading for 101 per 100 of par value. The bond offers a 6% coupon rate with interest paid semiannually. The bond is first callable in 3 years, and is callable...
Consider a 2-year $4000 bond that's redeemable at par and pays semi-annual coupons at a rate of c2) 8%. 70. (a) Suppose that the yield rate is 4% compounded annually. Determine: The purchase price of the bond. P = $ %3D The bond's duration to 3 decimals. D: years %3| Note: Use the purchase price to the closest cent in your duration calculation. (b) Suppose that the yield rate is 4% compounded semi-annually. Determine: The purchase price of the bond....
5. Eleven years from now the bond will have 1 year until maturity. Assume market interest rates are at 7 percent, the same place they were when the bond was issued. Given this: k. What will be the bond's price 11 years from now? 1. What will be the current yield eleven years from now? m. What is the expected capital gains yield eleven years from now? n. How does you answers to part (1) and (m) compare with your...
Below is some useful material.
A portfolio manager wants to estimate the interest rate risk of a bond using duration. The current price of the bond is 82. A valuation model found that if interest rates decline 30 basis points, the price will increase to 83.50 and if interest rates increase by 30 basis points, the price will decline to 80.75. What is the duration of this bond? [Read Attachment #1 before attempting.) Macaulay, Modified and Approximate Modified Durations Macaulay...
Most questions answered within 3 hours.
-
What's the streaming business's problem on the
horizon?
asked 34 minutes ago -
I need help with writing the conclusion for this online lab
report
Abstract
By testing the...
asked 47 minutes ago -
For the reaction 1N2+3H2-----> 2NH3, would the reaction rate
trend be: delta[NH3]/ delta t = -2...
asked 1 hour ago -
Within your current/past organization, identify a problem/issue
and format a design to address same. You may...
asked 1 hour ago -
A sock stuck to the side of a clothes-dryer barrel has a
centripetal acceleration of 24...
asked 2 hours ago -
A perfect gas undergoes an isentropic process such that its
volume doubles. If the ratio of...
asked 2 hours ago -
list the elements in groups 3A to 6A in the same order as in the
periodic...
asked 2 hours ago -
Estimating effect size. Peng and Chen (2014)
evaluated effect size estimates for various tests. In their...
asked 2 hours ago -
Write a script in MySQL that creates and calls a stored
procedure name test. This procedure...
asked 2 hours ago -
If we test the following: H0: μ = 17
vs. H1: μ ≠ 17 and the...
asked 3 hours ago -
in the past year TVG had revenues of 3 million, cost
of goods sold of $25...
asked 3 hours ago -
4) In a polypeptide, which bond cannot rotate because of its
partial double bond character?
The...
asked 3 hours ago