You find a bond with 27 years until maturity that has a coupon rate of 9.0 percent and a yield to maturity of 8.1 percent. Suppose the yield to maturity on the bond increases by .25 percent. a. What is the new price of the bond using duration and using the bond pricing formula? (Do not round intermediate calculations. Round your answers to 2 decimal places.) Answer is complete but not entirely correct.

You find a bond with 27 years until maturity that has a coupon rate of 9.0 percent and a yield to maturity of 8.1 percent. Suppose the yield to maturity on the bond increases by .25 percent. a. What is the new price of the bond using duration and using the bond pricing formula? (Do not round intermediate calculations. Round your answers to 2 decimal places.) Answer is complete but not entirely correct.

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

See similar textbooks

Similar questions

Consider a bond with a coupon of 7 percent, five years to maturity, and a current price of $1,025.30. Suppose the yield on the bond suddenly increases by 2 percent. a. Use duration to estimate the new price of the bond. (Do not round intermediate calculations. Round your answer to 2 decimal places.) Price b. Calculate the new bond price using the usual bond pricing formula. (Do not round intermediate calculations. Round your answer to 2 decimal places.) Price
Consider a bond that has a price of $1046.76, a coupon rate of 8.8%, a yield to maturity of 8.1%, a face value of $1000, and 10 years to maturity. What is the current yield? Enter your answer as a percentage. Do not include the percentage sign in your answer. Enter your response below. Enter your answer to 2 DECIMAL PLACES. Number %
Consider a bond with a coupon of 6.2 percent, five years to maturity, and a current price of $1,067.80. Suppose the yield on the bond suddenly increases by 2 percent. Use duration to estimate the new price of the bond. Note: Do not round intermediate calculations. Round your answer to 2 decimal places.
Calculate the modified duration of a bond that pays an annual coupon at a rate of 6% and matures in 2 years. This bond has a face value of 1,000 and is currently selling at a yield of 8%. Show calculations. Using just modified duration, if yield changes by 0.5%, what is the expected change in the price of the bond? Show calculations. Use the timeline method for this. Solving this in a calculator or at some other website that allows you to solve this kind of question and just putting the value is not going to be an acceptable answer.
Consider a bond that has just paid a semi-annual coupon and has exactly 2.5 years to maturity and an annual coupon rate of 3.5%. Price the bond with a yield 4.2%. This is an annuity calculation and the stated yield and stated coupon are double the semi-annual yield and coupon. Use Table 6.1. (Do not round Intermediate calculations. Round the final answer to 2 decimal places. Omit $ sign In your response.) Price of the bond $
Suppose that you buy a 1-year maturity bond with a coupon of 7% paid annually. If you buy the bond at its face value, what real rate of return will you earn if the inflation rate is 4%? 6%? 8%? (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places. Negative amount should be indicated by a minus sign.)
Consider a semi-annual bond that has a par value of 100, a 15-year maturity, a 5% coupon rate. Monthly interest rate is 0.412%. (a) Calculate the annualized semi-annual compounding yield. (b) What is the price of the bond (without calculation)? And explain why you can determine the price of the bond without calculation? (c) Using answers from (b), calculate the modified duration of this bond. (d) Using answers from (b) and (c), suppose that the bond’s yield to maturity decreases to 3.5%. How much will the bond price increase by applying the duration rule? (e) Do you agree with the following statement, and explain why? “If two bonds have the same duration, then the percentage change in price of the two bonds will be the same for a given change in interest rates.” (f) Discuss the problems with the traditional bond pricing approach by using the yield to maturity. (300 words Maximum)
The closing price of a U.S. Treasury bond with a face value of $1400 is quoted as 105.45 points, for a current yield of 3.7%. If you buy this bond, how much annual interest will you receive? Make sure your final answer is in a statement form. Show all your math formula/setun math work, and your answer in the space below.
You find a zero coupon bond with a par value of $10,000 and 24 years to maturity. The yield to maturity on this bond is 4.6 percent. Assume semiannual compounding periods. What is the price of the bond? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Price
Suppose that the prices of zero-coupon bonds with various maturities are given in the following table. The face value of each bond is $1,000. Maturity (Years) 1 2 3 4 5 Price $983.78 865.89 797.92 732.00 660.24 Required: a. Calculate the forward rate of interest for each year. b. How could you construct a 1-year forward loan beginning in year 3? c. How could you construct a 1-year forward loan beginning in year 4?
A coupon bond of 7.9 percent with 15 years left to maturity is priced to offer a 6.45 percent yield to maturity. You believe that in one year, the yield to maturity will be 7.2 percent. (Assume interest payments are semiannual.) What would be the total return of the bond in dollars? What would be the total return of the bond in percentage? Note: Do not round intermediate calculations. Round your final answer to 2 decimal places. Total return in dollars Total return in percentage Check my work %
Based on the following data, calculate an expected price and standard deviation. (Face value= 1,000 I = 7%) Maturity of the bond is 4 years; you are going to sell it next year, so that remaining maturity is 3 years Probability Required Yield Price Prob* Price Prob (P-EP) 2 0.5 7.00% 0.1 7.20% 0.4 7.40% What is your expected price when you sell the bond? What is the standard deviation of the bond price?

SEE MORE QUESTIONS

Recommended textbooks for you

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

SEE MORE TEXTBOOKS