1-year Forward rate (7) 0-years from now 1.25 1-year from now 1.75 2-years from now 1.908 3 Using the same information above, what is the price of the bond if it is callable at Par one year and two years from now at zero volatility? Maturity (years) 1 2 Spot rate (70) 1.25 1.5019 1.70491 Cash flow $3 $3 $103

1-year Forward rate (7) 0-years from now 1.25 1-year from now 1.75 2-years from now 1.908 3 Using the same information above, what is the price of the bond if it is callable at Par one year and two years from now at zero volatility? Maturity (years) 1 2 Spot rate (70) 1.25 1.5019 1.70491 Cash flow $3 $3 $103

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter4: Bond Valuation

Section: Chapter Questions

Problem 4P: Determinant of Interest Rates The real risk-free rate of interest is 4%. Inflation is expected to be...

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Maturity (years) Spot rate (%) 1-year Forward rate (%) 0-years from now 1.25 1-year from now 1.75 2-years from now 1.908 Cash flow $3 $3 $103 1 1.25 2 1.5019 1.70491 Using the same information above, what is the price of the bond if it is callable at Par one year and two years from now at zero volatility? O A. $106.6914 B. $104.6914 OC. $102.6914 OD. $114.6914
Question 4 The following is a list of prices today for bonds with different maturities. Face value is 100. Assume that the bonds pay their coupons annually, and that the YTMs in the table are annualized and compounded annually. Both coupon rate and yield to maturity (YTM) is in percent. Maturity (years) Price Coupon rate YTM 1 98.00 0 ?2 100 ? 5.00 3?9 6.00 Fill in the missing values in the table.What are the annualized spot rates for years 1 & 2 (r1 & r2)? Given r1 & r2, what is the price of a 2-year coupon bond with annual coupon rate of 7%? What is the duration of this bond?
Bond The effect of coupon rate (PMT) on interest rate sensiti 10-year, 10% annual coupor 10-year, 20% annual coupon 10-year, zero coupon 0 The effect of time to maturity on interest rate sensitivit 10-year, 15% annual coupon 5-year, 15% annual coupon Price @YTM-8% Price @YTM= 7% Percentage Change in price 1134.21 1210.66 6.74 463.2 508.3 9.74
Given n1-year par rate = 4% n2-year par rate = 5.2% n3-year par rate = 6.4% nSuppose the bond price is K1, 1 - Compute the 1-year, 2-year and 3-year spot rates using bootstrapping process. 2 - Compute the 1-year forward rates, starting from today, 1 year from now and 2-year from now
QUESTION 1 Suppose that 6-month, 12 month, 18-month, 24-month, and 30-month zero rates are 4% 42 4.4% 4.6, and 4.6% per annum with contimuous compounding respectvely Etmat the cash price of a bond with a face value of 100 that will mature in 30 months and pays a coupon of 4% per anm emiannially
Bond ABCD Coupon Rate (annual payments) 0.0% 0.0% 3.7% 7.7% Maturity (years) 15 10 15 10 What is the percentage change in the price of each bond if its yield to maturity falls from 6.2% to 5.2%?
Bond quote Face value ($) Time to maturity (years) Annual coupon payments (paid semi-annually) bond price ($) zero rate 100 0.5 0 98 4.0405% 100 1 0 97 ? 100 1.5 15 115 ? 100 2 20 ? 5.500% Using the Table above, find the appropriate zero rates for1 year find the appropriate zero rates for 1.5 year find the 2-year bond price find the par-yield for the 2-year-maturity bond *Note1: zero rate for the 6 month period is done for you. *Note 2: coupon payments given are yearly coupon payments, which these will be paid out semi-annually (i.e. every 6 months)
QUESTION 6 A. B. Matur ity (year s) 1 D. 2 3 $114.51 $113.45 $112.508 Spot rate (%) $120.54 1.25 1.50 19 2-years from now 1.908 Using the spot rates, what would be the value of an option-free bond that pays 6% annual coupon? Par value is $100. 1-year Forward rate (%) 1.70 491 0-years from now 1.25 1-year from now 1.75 Cash flow $3 $3 $103
Bond quote Face value ($) Time to maturity (years) Annual coupon payments (paid semi-annually) bond price ($) zero rate 100 0.5 0 98 4.0405% 100 1 0 97 ? 100 1.5 15 115 ? 100 2 20 ? 5.500% Using the Table above, find the appropriate zero rates for1 year find the appropriate zero rates for 1.5 year find the 2-year bond price find the par-yield for the 2-year-maturity bond *Note1: zero rate for the 6 month period is done for you. *Note 2: coupon payments given are yearly coupon payments, which these will be paid out semi-annually (i.e. every 6 months) When doing calculations in this course, use at least 6 decimal places for accurate answers.
K Assume that a bond will make payments every six months as shown on the following timeline (using six-month periods): 0 2 5 Period $19.53 a. What is the maturity of the bond (in years)? b. What is the coupon rate (as a percentage)? c. What is the face value? Cash Flows View an example Get more help. ★ a. What is the maturity of the bond (in years)? The maturity is years. (Round to the nearest integer.) A 6 1 MacBook Pro & 7 $19.53 * 8 9 C 59 $19.53 60 $19.53+$1,000 Clear all BUB 0 {
Calculate the value of a 2-year 3.5% annual pay bond given the interest rate below. What is the implied 3-year spot rate? Time Period Forward Rate z1 0.80% 1f1 1.12% 1f2 3.94% 1f3 3.28% 1f4 3.14%
Question 3 A$100 000 bond has 3 years to maturity, and 8% p.a. coupon rate (paid annually). The current yield rate is 10%. Required: a) What is the duration of this bond? b) What is the price of this bond? c) If the current yield is decreased by 100 basis points, 1) What is the percentage change in bond price using the duration approach? 2) What is the price of this bond with this new yield rate?