investor wants to find the duration of a(n) 15-year, 6% semiannual pay, noncallable bond that's currently priced in the market at $587.05, to yield 12%. Using a 150 basis point change in yield, find the effective duration of this bond (Hint: use Equation 11.11). Question content area bottom Part 1 The new price of the bond if the market interest rate decreases by 150 basis points (or 1.5%) is $enter your response here. (Round to the nearest cent.)

investor wants to find the duration of a(n) 15-year, 6% semiannual pay, noncallable bond that's currently priced in the market at $587.05, to yield 12%. Using a 150 basis point change in yield, find the effective duration of this bond (Hint: use Equation 11.11). Question content area bottom Part 1 The new price of the bond if the market interest rate decreases by 150 basis points (or 1.5%) is $enter your response here. (Round to the nearest cent.)

Pfin (with Mindtap, 1 Term Printed Access Card) (mindtap Course List)

7th Edition

ISBN:9780357033609

Author:Randall Billingsley, Lawrence J. Gitman, Michael D. Joehnk

Publisher:Randall Billingsley, Lawrence J. Gitman, Michael D. Joehnk

Chapter12: Investing In Stocks And Bonds

Section: Chapter Questions

Problem 6FPE

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The current 1-year bond and 2-year bond interest rates are both 4% and the market expects the 1-year bond interest rate to go down by 1% next year. This implies that the 2-year term premium is _______%. Question 37 options:
An investor wants to find the duration of a(n) 15-year, 6% semiannual pay, noncallable bond that's currently priced in the market at $542.95, to yield 13%. Using a 150 basis point change in yield, find the effective duration of this bond (Hint: use Equation 11.11). (...) The new price of the bond if the market interest rate decreases by 150 basis points (or 1.5%) is $ (Round to the nearest cent.)
Question 6. A two-year coupon bond has the following characteristics: Buying price: 18750 $ Face Value: 20000 S Annual interest rate: 5% Mode of payment: Quarterly What will be the final earning in acquiring such as a bond?
An investor wants to find the duration of a(n) 30-year, 9% semiannual pay, noncallable bond that's currently priced in the market at $649.02, to yield 14%. Using a 50 basis point change in yield, find the effective duration of this bond (Hint: use Equation 11.11). The new price of the bond if the market interest rate decreases by 50 basis points (or 0.5%) is $ (Round to the nearest cent.) C
a. Reset the Data Section to its initial values. The price of this bond is 1,407,831. What would it be if there were only 9 or 8 years to maturity? Use the worksheet to compute the bond issue prices and enter them in the spaces provided. Bond issue price (9 years to maturity) __________________ Bond issue price (8 years to maturity) __________________ b. Compare these prices to the bond-carrying values found in the effective interest amortization schedule you originally printed out in requirement 3. Explain the similarity. c. Click the Chart sheet tab. The chart presented shows the price behavior of this bond based on years to maturity. Explain what effect years to maturity has on bond prices. Check your explanation by trying 8% as the effective rate (cell E10) and clicking the Chart sheet tab again. Also try 9%. When the assignment is complete, close the file without saving it again. Worksheet. Modify the BONDS3 worksheet to accommodate bonds with up to 20-year maturity. Use your new model to determine the issue price and amortization schedules of a 2,000,000, 18-year, 10% bond issued to yield 9%. Preview the printout to make sure that the worksheet will print neatly, and then print the worksheet. Save the completed file as BONDST. Hint: Expand both amortization schedules to 20 years. Expand the scratch pad to 20 years. Modify FORMULA1 in cell F17 to include the new ranges. Chart. Using the BONDS3 file, prepare a line chart that plots annual interest expense over the 10-year life of this bond under both the straight-line and effective interest methods. No Chart Data Table is needed. Put A23 to A32 in the Label format and then select A23 to A32, D23 to D32, and B40 to B49 as a collection. Enter all appropriate titles, legends, formats, and so forth. Enter your name somewhere on the chart. Save the file again as BONDS3. Print the chart.
Question 4 (a) Consider a 3-year forward contract to buy a coupon-bearing bond thatwill mature 3-years from today. The current price of the bond is $120. Suppose that on that bond 3 coupon payments of $10 are expected after 12, 24, and 36 months. We assume that the 12M, 24M, and 36M risk-free interest rates (continuously compounded) are 1.75%, $2.1, and 2.5% per annum, respectively. Determine the strike price, the forward price and the value of the forward contract.(b) 18 months later, the price of the bond is $105 and the risk-free interest rates for maturity 6M and 18M (continuously compounded) are 1.1% and 1.9% per annum, respectively. What are the strike price, the forward price and the value of the forward contract?
You observe the following term structure: 1-year zero-coupon bond 2-year zero-coupon bond 3-year zero-coupon bond 4-year zero-coupon bond Effective Annual Required A Required B YTM Required: a. If you believe that the term structure next year will be the same as today's, calculate the return on (1) the 1-year zero and (ii) the 4- year zero. b. Which bond provides a greater expected 1-year return? 8.3% 8.4 8.5 8.6 Complete this question by entering your answers in the tabs below. One year return on 1-year bond One year return on 4-year bond If you believe that the term structure next year will be the same as today's, calculate the return on (i) the 1-year zero and (ii) the 4-year zero. Note: Do not round intermediate calculations. Round your answers to 1 decimal place. % %
Give typing answer with explanation and conclusion If a bond is issued at the price of $10,000 per contract and promises a 5.7% interest every year, the contact will be redeemed by the issuer at a discount after 8 years for $9,200. If the market is offering a return of 4.8% for similar risk securities, what would be the price you are ready to offer for this bond? Question 4 options: $10,590 $10,040 $10,290 $9,740
Q.2:A 16% callable bond, having 19 years to maturity has a market price of $1400. What value you would place on this bond if the market required return is 18%. If the bond is called after 11 years and a call premium is paid, which is equal to the next 3 year's advance coupon payment (as mentioned in the indenture), should this bond be purchased or not? Give reasons to justify your answer.
Question two Using the following data, estimate the new bond prices of each of the 3 bonds if their yields (interest rates) increase by 0.3%. You should take into account both duration and convexity. Company Maturit Coupo Payment Duratio Yield y Date frequency BP Rio Tinto 2033 Severn Trent 2021 ΔΡ P 2058 n 3.561% Semi- annual 6.125% semi-annual 12.89 n 1.457% semi-annual 24.053 -×100 = (– D™ × Ay×100) + m 8.217 2 The percentage change in the bond price is estimated: 3.11% 78.935 Convexity 4.635% 229.86 4.773% 878.73 ×Convexity× (Ay)² × 100 Bond Price (TZS) 104.52 120.36 37.92
Consider a bond with a current value of $928.01. It is a 10-year, $1,000 bond, coupons paid semi-annually, and has a 7% coupon rate. a. The bond's yield to maturity (YTM) is: b. What will be its value (per $1,000 of face) if its YTM changes to 10%? Question content area bottom Part 1 a. The YTM is enter your response here%. (Round to two decimal places.) b. Value (per $1,000 of face): $enter your response here. (Round to the nearest cent.)
You observe the following term structure: Effective Annual YTM 1-year zero-coupon bond 8.1% 2-year zero-coupon bond 8.2 3-year zero-coupon bond 8.3 4-year zero-coupon bond 8.4 Required: If you believe that the term structure next year will be the same as today’s, calculate the return on (i) the 1-year zero and (ii) the 4-year zero. Which bond provides a greater expected 1-year return?