Calculate the duration of the following loans (please indicate if you make any additional assumptions): a. An interest o...
Calculate the duration of the following loans (please indicate if you make any additional assumptions):
a. An interest only loan with a maturity of 7 years that pays an annual coupon of 6% and has a 5.875% yield to maturity.
b. A 12-year zero coupon loan.
c. A 4-year amortized loan with an interest rate of 3.75% with quarterly payments and a 4.625% yield to maturity.
Homework Answers
We will use the excel function DURATION to get the duration of each of the bonds. Let's assume a settlement price of 01/01/2019 (this assumption is required to make DURATION function work, this assumption will not impact your final output.
Please note that the duration of a zero coupon loan is same as the term of the loan.
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Calculate the duration of the following loans (please indicate if you make any additional assumptions): a. An interest o...
a. A 6% coupon bond paying interest annually has a modified duration of 7 years, sells...
a. A 6% coupon bond paying interest annually has a modified duration of 7 years, sells for $820, and is priced at a yield to maturity of 9%. If the YTM decreases to 8%, what is the predicted change in price ($) using the duration concept? (2 marks) b. A bond with annual coupon payments has a coupon rate of 6%, yield to maturity of 7 % , and Macaulay duration of 12 years. What is the bond's modified duration?...
please explain how to calculate in a financial calculator Question 2. MTV Corporation has 7 percent coupon bonds on...
please explain how to calculate in a financial
calculator
Question 2. MTV Corporation has 7 percent coupon bonds on the market with a par of $1,000 and 8 years left to maturity. The bonds make semi-annual interest payments. If the market interest rate on these bonds is 6 percent, what is the current bond price? Question 3. Jones Corporation has zero coupon bonds on the market with a par of $1,000 and 8 years left to maturity. If the market...
please show how to calculate with financial calculator. Question 3. Jones Corporation has zero coupon bonds on the m...
please show how to calculate with financial calculator.
Question 3. Jones Corporation has zero coupon bonds on the market with a par of s1,000 and 8 years left to maturity. If the market interest rate on these bonds is 6 percent what is the current bond price? (Use the semi-annual interest payment model.) Question 4. Wilson Corporation has 5 percent coupon bonds on the market with a par of $1,000 and 6 years left to maturity. The bonds make annual...
please show how to compute with a financial calculator. thank you! Bond Valuation Exercises: OM Question...
please show how to compute with a financial calculator. thank
you!
Bond Valuation Exercises: OM Question 1. GTF Corporation has 5 percent coupon bonds on the market with a par of $1,000 and 10 years left to maturity. The bonds make annual interest payments. If the market interest rate on these bonds is 7 percent, what is the current bond price? Question 2. MTV Corporation has 7 percent coupon bonds on the market with a par of $1,000 and 8...
please show how to do 5. What is the duration of a two-year zero coupon bond...
please show how to do
5. What is the duration of a two-year zero coupon bond that pays $10,000 at maturity and is priced to yield 9 percent with semiannual compounding? a. 2.00 years b. 2.31 years c. 2.66 years d. 2.79 years
Show work (40 Points) As the new management trainee at the Rossville Bank of Tennessee, you...
Show
work
(40 Points) As the new management trainee at the Rossville Bank of Tennessee, you are given balance sheet, you have been asked by the bank president to determine the current mark-to-market balance sheet and modified durations for the bank's assets and liabilities. Fill in the blanks with market values and modified durations. Some of this information is already filled in. The bank has only three types of assets and two types of deposits. Amounts are in S thousands...
9. A financial institution is considering a customer’s request for a 12-year $15 million loan, with annual interest paym...
9. A financial institution is considering a customer’s request for a 12-year $15 million loan, with annual interest payments and the principal due at maturity. The financial institution requires a 22.5% risk adjusted return on capital for this loan. Its cost of funds is 3.875% for this loan and it will charge a 2% risk premium. Historically, the worst 1% of comparable loans experience a 125 basis point increase in the credit risk premium. The financial institution’s typical origination fee...
*Please explain the answers* 1- .Although you will get a 30-year mortgage, you plan to prepay...
*Please explain the answers* 1- .Although you will get a 30-year mortgage, you plan to prepay the loan by making an additional payment each month along with your regular payment. How much extra must you pay each month if you wish to pay off the loan in 20 years? A) $ 24.56 B) $ 54.88 C) $100.80 D) $103.28 E) $106.86 24. 2- J&J Manufacturing just issued a bond with a $1,000 face value and a coupon rate of 8%....
Show Work Please 4. (35 points) A bond with a yield to maturity of 3% and...
Show Work Please
4. (35 points) A bond with a yield to maturity of 3% and a coupon rate of 3% has 3 years re- maining until maturity. Calculate the duration and the modified duration for this bond assuming annual interest payments and a par value of $1,000. Why is the duration of this bond higher than the 3-year 10% coupon bond yielding 10% we looked at in class that had a duration of 2.7 years? If the required market...
Please solve A, B,C, and D 1. Duration-Amortized Loan Your FI has a loan with the...
Please solve A, B,C, and D
1. Duration-Amortized Loan Your FI has a loan with the following characteristics Principle $100,000 Rate (annual) 6% Loan Terms: The loan is for a 2-year period, Payments are made every six months. Each payment consists of all accrued interest (up to that point), plus 25% of the total principle. There will be a total of four payments, after which the principle will be fully repaid. The payment schedule is as follows: Year Principle Interest...
a. A 6% coupon bond paying interest annually has a modified duration of 7 years, sells for $820, and is priced at a yield to maturity of 9%. If the YTM decreases to 8%, what is the predicted change in price ($) using the duration concept? (2 marks) b. A bond with annual coupon payments has a coupon rate of 6%, yield to maturity of 7 % , and Macaulay duration of 12 years. What is the bond's modified duration?...
please explain how to calculate in a financial
calculator
Question 2. MTV Corporation has 7 percent coupon bonds on the market with a par of $1,000 and 8 years left to maturity. The bonds make semi-annual interest payments. If the market interest rate on these bonds is 6 percent, what is the current bond price? Question 3. Jones Corporation has zero coupon bonds on the market with a par of $1,000 and 8 years left to maturity. If the market...
please show how to calculate with financial calculator.
Question 3. Jones Corporation has zero coupon bonds on the market with a par of s1,000 and 8 years left to maturity. If the market interest rate on these bonds is 6 percent what is the current bond price? (Use the semi-annual interest payment model.) Question 4. Wilson Corporation has 5 percent coupon bonds on the market with a par of $1,000 and 6 years left to maturity. The bonds make annual...
please show how to compute with a financial calculator. thank
you!
Bond Valuation Exercises: OM Question 1. GTF Corporation has 5 percent coupon bonds on the market with a par of $1,000 and 10 years left to maturity. The bonds make annual interest payments. If the market interest rate on these bonds is 7 percent, what is the current bond price? Question 2. MTV Corporation has 7 percent coupon bonds on the market with a par of $1,000 and 8...
please show how to do
5. What is the duration of a two-year zero coupon bond that pays $10,000 at maturity and is priced to yield 9 percent with semiannual compounding? a. 2.00 years b. 2.31 years c. 2.66 years d. 2.79 years
Show
work
(40 Points) As the new management trainee at the Rossville Bank of Tennessee, you are given balance sheet, you have been asked by the bank president to determine the current mark-to-market balance sheet and modified durations for the bank's assets and liabilities. Fill in the blanks with market values and modified durations. Some of this information is already filled in. The bank has only three types of assets and two types of deposits. Amounts are in S thousands...
Show Work Please
4. (35 points) A bond with a yield to maturity of 3% and a coupon rate of 3% has 3 years re- maining until maturity. Calculate the duration and the modified duration for this bond assuming annual interest payments and a par value of $1,000. Why is the duration of this bond higher than the 3-year 10% coupon bond yielding 10% we looked at in class that had a duration of 2.7 years? If the required market...
Please solve A, B,C, and D
1. Duration-Amortized Loan Your FI has a loan with the following characteristics Principle $100,000 Rate (annual) 6% Loan Terms: The loan is for a 2-year period, Payments are made every six months. Each payment consists of all accrued interest (up to that point), plus 25% of the total principle. There will be a total of four payments, after which the principle will be fully repaid. The payment schedule is as follows: Year Principle Interest...
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