10. The bond has a 30-year maturity, an 8% coupon, and sells at an initial yield to maturity of 8%. Because the coupon rate equals yield to maturity, the bond sells at par value, or $1,000. The modified duration of the bond at its initial yield is 11.26 years, and its convexity is 212.4. If the bond's yield increases from 8% to 10%, the bond price will fall to $811.46, a decline of 18.85%. a. How does the price change according to the duration rule?

10. The bond has a 30-year maturity, an 8% coupon, and sells at an initial yield to maturity of 8%. Because the coupon rate equals yield to maturity, the bond sells at par value, or $1,000. The modified duration of the bond at its initial yield is 11.26 years, and its convexity is 212.4. If the bond's yield increases from 8% to 10%, the bond price will fall to $811.46, a decline of 18.85%. a. How does the price change according to the duration rule?

Essentials of Economics (MindTap Course List)

8th Edition

ISBN:9781337091992

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter19: The Basic Tools Of Finance

Section: Chapter Questions

Problem 3PA

See similar textbooks

Similar questions

Consider a coupon bond that has a $1.000 par value and a coupon rate of 9%. The bond is currently selling for $1,150 and has 9 years to maturity. What is the bond's yield to maturity?
Suppose that you purchase a 2 year coupon bond at the time it is issued for $1100. The face value of the bond is $1000, with annual coupon payments of $80. a. What is the bond’s “coupon rate”? b. What is the bond’s “current yield”? c. What is the bond’s (nominal) “yield to maturity”? d. If you hold the bond for 1 year and sell it for $1035 (after collecting the first coupon payment), what is your “holding period rate of return”? Please answer all part otherwise Dounvote
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.
Suppose a 3 year bond with a 6% coupon rate that was purchased for $760 and had a promised yield of 8%. Suppose that interest rates increased and the price of the bond declined. Displeased, you sold the bond for 798.8 after having owned it for 1 year. What should be the realized yield ?
Suppose a 10-year, $1,000 bond with a(n) 11% coupon rate and semiannual coupons is trading for a price of $970.75. a. What is the bond's yield to maturity (expressed as an APR with semiannual compounding)? b. If the bond's yield to maturity changes to 9% APR, what will the bond's price be?
bond valuation An investor has two nonds in her portfolio, bond C and bond Z. each bond maturres in 4 years has a face value of 1000, and has a yield to maturity of 9.6% bond C pays a 10% annual coupon, while bond Z is a zeo coupon bond . b- assuming that the yield to maturity of each bond remains at9.6% over the next 4 years, calculate the price of the bonds at each of the following years to maturity year 4,3,2,1,0 b- plot the time path of price for each bond
1. What is the present value of $500.00 to be paid in two years if the annual interest rate is 5%? $___ 2. The current interest rate on a 10-year treasury note (with face value = $100 and annual coupon rate = 2.625%) is 3.37%. The buyer of this note will receive $ ____ payment from the treasury every year before maturity while holding the bond.
Suppose an ordinary bond has a coupon rate of 10 percent, the yield to maturity is quotedat 12 percent. This is semiannual coupon, the bond matures in ten years. Calculate thebond’s price. Calculate the effective annual yield on this bond.
Ex: Consider a discount bond that has a 1000 TL face value. Current price of the bond is 900 TL and the bond has two years to maturity. What is the yield to maturity for this bond?
3. What is the yield to maturity of a 15% coupon bond selling for $900 that has a face value of $1,000?
1. Suppose that on January 1, 2021, you purchased a coupon bond with the following characteristics: a face value of $1,000, a coupon rate of 8.375%, a current yield of 7.5%, and the maturity date 2025. If the bond is selling for $850 on January 1, 2022, what was your rate of return on this bond during the holding period of calendar year 2021?
A corporate bond pays 6% of its face value once per year. If this $10,000 10-year bond sells now for $10,450, what yield will be earned on this bond? Assume the bond will be redeemed at the end of 10 years for $10,000. The yield to maturity is %. (Round to two decimal places.)