True or False 1. There is a positive relationship between changes in the yield to maturity...
True or False
1. There is a positive relationship between changes in the yield to maturity and changes in the value of previously issued bonds.
2. There is a positive relationship between changes in the coupon rate and changes in duration.
3. Duration is the weighted average time to maturity of a financial security.
4. There is a linear relationship between changes in the yield to maturity and changes in the value of a bond.
Homework Answers
1. False . Because when YTM increases price decreases.
2. True. Because Higher the coupon rate more is the duration.
3. True. It is weighted average time to maturity
4. False. It is not a linear relationship between changes in YTM
and changes in the value of bond.
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True or False 1. There is a positive relationship between changes in the yield to maturity...
a. What is the difference between coupon rate and yield to maturity? How do you use...
a. What is the difference between coupon rate and yield to maturity? How do you use the coupon rate to calculate the periodic payment received from a bond? b. What is the price of a bond that is currently trading at a yield of 10% and has a face value of $1,000? This bond still has exactly 5 years to maturity. This bond pays semi-annual coupon at an annual rate of 8% (i.e., each coupon is 4%). Show how you...
True or False: g. The price of a bond in between coupons payments includes the interest...
True or False: g. The price of a bond in between coupons payments includes the interest earned on all previous coupon payments. h. If coupon rate and yield are the same then the price of the bond equals the maturity (face) value. i. _ _Anti-derivatives differ by a multiplicative constant. J. _ _Macaulay Duration is at most the term of a bond.
6. Yield to maturity Moe’s Inc. has bonds outstanding with a par value of $1000 and...
6. Yield to maturity Moe’s Inc. has bonds outstanding with a par value of $1000 and 10 years to maturity. These bonds pay a coupon of $45 every six months. Current market conditions are such that the bond sells for $938. Calculate the yield to maturity on the issue. 7. Duration A newly issued 5-year Altec Corp. bond has a price of $1,095.99, a par value of $1,000 and a 12% coupon rate. Find the duration of the bond.
A 9-year maturity zero-coupon bond selling at a yield to maturity of 8.25% (effective annual yield)...
A 9-year maturity zero-coupon bond selling at a yield to maturity of 8.25% (effective annual yield) has convexity of 156.3 and modified duration of 8.06 years. A 30-year maturity 6.5% coupon bond making annual coupon payments also selling at a yield to maturity of 8.25% has nearly identical duration--8.04 years-but considerably higher convexity of 248.2 a. Suppose the yield to maturity on both bonds increases to 9.25%. What will be the actual percentage capital loss on each bond? What percentage...
Yield to maturity a spreadsheet.) The bond shown in the following table pays interest annually. (Click...
Yield to maturity a spreadsheet.) The bond shown in the following table pays interest annually. (Click on the icon here in order to copy the contents of the data table below into Coupon interest rate Years to maturity Par value $1,000 Current value $1,230 a. Calculate the yield to maturity (VTM) for the bond b. What relationship exists between the coupon interest rate and yield to maturity and the par value and market value of a bond? Explain a. The...
Identify/explain the relationship between coupon rate and yield to maturity for: Discount Bonds Premium Bonds Par Val...
Identify/explain the relationship between coupon rate and yield to maturity for: Discount Bonds Premium Bonds Par Value Bonds
Question 1 (16 marks) (a) Are the following statements true or false? Briefly explain your answer....
Question 1 (16 marks) (a) Are the following statements true or false? Briefly explain your answer. i) “The duration of a zero-coupon bond equals its time to maturity.” ii) Holding maturity constant, a bond's duration is lower when the coupon rate is higher.” iii) “Holding other factors constant, the duration of a coupon bond is higher when the bond's yield to maturity is lower.” (12 marks) (b) “It is not possible to forecast stock returns in an efficient market.” (4...
please explain the ans clearly, thanks (a) Are the following statements true or false? Briefly explain...
please explain the ans clearly, thanks
(a) Are the following statements true or false? Briefly explain your answer. i) “The duration of a zero-coupon bond equals its time to maturity.” ii) Holding maturity constant, a bond's duration is lower when the coupon rate is higher.” iii) “Holding other factors constant, the duration of a coupon bond is higher when the bond's yield to maturity is lower.” (12 marks) (b) “It is not possible to forecast stock returns in an efficient...
QUESTION 27 10 points Save Answer Negative convexity is best illustrated by observing the price yield...
QUESTION 27 10 points Save Answer Negative convexity is best illustrated by observing the price yield relationship of a: Plain vanilla bond Callable bond Equity security None of the above QUESTION 28 10 points Save Answer A Zero-Coupon Bond with a 10 year maturity has a Duration of approximately: 1 OOOO QUESTION 29 10 points Save Answer Convexity measures how Duration changes as market yields change. O True False
36. Estimate the convexity for each of the following three bonds, all of which trade at a yield t...
36. Estimate the convexity for each of the following three bonds, all of which trade at a yield to maturity of 8 percent and have face values of $1.000. A 7-year, zero-coupon bond. A 7-year, 10 percent annual coupon bond A 10-year, 10 percent annual coupon bond that has a duration value of 6.994 years (i.e., approximately 7 years) Rank the bonds in terms of convexity and express the convexity relationship between zeros and coupon bonds in terms of maturity...
True or False: g. The price of a bond in between coupons payments includes the interest earned on all previous coupon payments. h. If coupon rate and yield are the same then the price of the bond equals the maturity (face) value. i. _ _Anti-derivatives differ by a multiplicative constant. J. _ _Macaulay Duration is at most the term of a bond.
A 9-year maturity zero-coupon bond selling at a yield to maturity of 8.25% (effective annual yield) has convexity of 156.3 and modified duration of 8.06 years. A 30-year maturity 6.5% coupon bond making annual coupon payments also selling at a yield to maturity of 8.25% has nearly identical duration--8.04 years-but considerably higher convexity of 248.2 a. Suppose the yield to maturity on both bonds increases to 9.25%. What will be the actual percentage capital loss on each bond? What percentage...
Yield to maturity a spreadsheet.) The bond shown in the following table pays interest annually. (Click on the icon here in order to copy the contents of the data table below into Coupon interest rate Years to maturity Par value $1,000 Current value $1,230 a. Calculate the yield to maturity (VTM) for the bond b. What relationship exists between the coupon interest rate and yield to maturity and the par value and market value of a bond? Explain a. The...
Question 1 (16 marks) (a) Are the following statements true or false? Briefly explain your answer. i) “The duration of a zero-coupon bond equals its time to maturity.” ii) Holding maturity constant, a bond's duration is lower when the coupon rate is higher.” iii) “Holding other factors constant, the duration of a coupon bond is higher when the bond's yield to maturity is lower.” (12 marks) (b) “It is not possible to forecast stock returns in an efficient market.” (4...
please explain the ans clearly, thanks
(a) Are the following statements true or false? Briefly explain your answer. i) “The duration of a zero-coupon bond equals its time to maturity.” ii) Holding maturity constant, a bond's duration is lower when the coupon rate is higher.” iii) “Holding other factors constant, the duration of a coupon bond is higher when the bond's yield to maturity is lower.” (12 marks) (b) “It is not possible to forecast stock returns in an efficient...
QUESTION 27 10 points Save Answer Negative convexity is best illustrated by observing the price yield relationship of a: Plain vanilla bond Callable bond Equity security None of the above QUESTION 28 10 points Save Answer A Zero-Coupon Bond with a 10 year maturity has a Duration of approximately: 1 OOOO QUESTION 29 10 points Save Answer Convexity measures how Duration changes as market yields change. O True False
36. Estimate the convexity for each of the following three bonds, all of which trade at a yield to maturity of 8 percent and have face values of $1.000. A 7-year, zero-coupon bond. A 7-year, 10 percent annual coupon bond A 10-year, 10 percent annual coupon bond that has a duration value of 6.994 years (i.e., approximately 7 years) Rank the bonds in terms of convexity and express the convexity relationship between zeros and coupon bonds in terms of maturity...
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