8. Consider a 10 year 6.50% annual coupon bond whose duration is 7.50 years when required rate of return (yield to maturity) is 6.50%. Prove that this bond is immunized if you hold it for 7.50 years.
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- 8. An effective rate of interest, which is 12.75%, is equivalent to what percent if compounded continuously.Showing your working out, compute the price of all four bonds: Face Value Maturity (years) Yield Frequency of yield Coupon rate Frequency of coupon Bond 1 £1000 3 3% semi-annual 8% semi-annual Bond 2 £1000 4 3% quarterly 4% semi-annual Bond 3 £100 2 2% monthly 3% quarterly Bond 4 £100 5 3% monthly 4% semi-annualQ1. coupon bond, with semiannualcoupons, face value of 1,000, 20 years to maturity,$1,197.93 price. Current yield = ?
- Which of these gives the lowest effective rate of interest? a. 12.35% compounded annually b. 11.90% compounded semi-annually c. 12.20% compounded quarterly d. 11.60% compounded monthlyHow much should you pay for a $1,000 bond with 10% coupon, annual payments, and 5 years to maturity if the interest rate is 12%?What should be the price of a 8year zero-coupon bond with a face value of $1000 where zero-coupond bonds yield 6% interest?
- Determine the effective interest rate for the following cases. a.10% compounded weekly b.10% compounded daily c. 10% compounded Quarterly d.10% compounded continuouslyHow much money will be in a bank account at the end of 15 years if $100 is deposited to day and the interest rate is 8 percent compounded annually?8. How long will it take the money to triple itself if invested at 8% compounded annually?
- Q- ramdev A $3,500 bond with a 4% coupon compounded semi-annually is currently priced to yield 8% with 16 years remaining to maturity. What is the yield to maturity six years from now if the bond price rises $225 at that time?What is the yield to maturity on a simple loan of $35,000 that requires a repayment of $40,000 in 3 years?Compute the future value of the following deposits made today:a. $10,000 at 6.75% compounding annually for 10 yearsb. $10,000 at 6.75% compounding quarterly for 10 yearsc. $10,000 at 6.75% compounding monthly for 10 years Compute the interest earned on the deposits made.