Bond A Bond B Years to maturity 5 years 10 years Coupon rate 5% 5% Par value 1000 1000 Yield to maturity 8% 6% Par amount owned R3,45 million R2 million Market value R30 367.59 (in 000’s) R18 528 (in 000’s) Without doing any calculations, which bond would have a higher duration Assuming that Bond A is an option-free bond, calculate the bond’s modified duration using Macauly’s Duration. Assume that the duration of Bond A and B is 4.2 and 7.5 respectively; determine the duration of the portfolio

Bond A Bond B Years to maturity 5 years 10 years Coupon rate 5% 5% Par value 1000 1000 Yield to maturity 8% 6% Par amount owned R3,45 million R2 million Market value R30 367.59 (in 000’s) R18 528 (in 000’s) Without doing any calculations, which bond would have a higher duration Assuming that Bond A is an option-free bond, calculate the bond’s modified duration using Macauly’s Duration. Assume that the duration of Bond A and B is 4.2 and 7.5 respectively; determine the duration of the portfolio

Excel Applications for Accounting Principles

4th Edition

ISBN:9781111581565

Author:Gaylord N. Smith

Publisher:Gaylord N. Smith

Chapter11: Bond Pricing And Amortization (bonds)

Section: Chapter Questions

Problem 8R: a. Reset the Data Section to its initial values. The price of this bond is 1,407,831. What would it...

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Bond A Bond B Years to maturity 5 years 10 years Coupon rate 5% 5% Par value 1000 1000 Yield to maturity 8% 6% Par amount owned R3,45 million R2 million Market value R30 367.59 (in 000’s) R18 528 (in 000’s) Required: Without doing any calculations, which bond would have a higher duration Assuming that Bond A is an option-free bond, calculate the bond’s modified duration using Macauly’s Duration. Assume that the duration of Bond A and B is 4.2 and 7.5 respectively; determine the duration of the portfolio.
Consider the following two-bond portfolio of option-free bonds; Bond A Bond BYears to maturity 5 years 10 yearsCoupon rate 5% 5%Par value 1000 1000Yield to maturity 8% 6%Par amount owned R3,45 million R2 millionMarket value R30 367.59 (in 000’s) R18 528 (in 000’s) Required:a) Without doing any calculations, which bond would have a higher durationb) Assuming that Bond A is an option-free bond, calculate the bond’s modified duration using Macauly’s Duration.c) Assume that the duration of Bond A and B is 4.2 and 7.5 respectively; determine the duration of the portfolio.
If the YTM on the following bonds are identical except, what is the price of bond B? Bond A Bond B Face value $1,000 $1,000 Semiannual coupon $45 $35 Years to maturity 20 20 Price $1,098.96 ?
INV3 P1a Bond # 1 2 3 4 1 - year strip bond 2- year strip bond 2-year 6% coupon bond 2-year 7% coupon bond Purchase Price for the bond) 950 ? ? ? Year 1 cash flow 1000 0 60 70 Year 2 cash flow 0 1000 1060 1070 Yield to Maturity ? ? 5.50% ? Fill in the missing pieces from the following table using the Law of One Price. Assume all these bonds have the same risk, the yield curve is flat, and any coupon payments are paid annually.
Bond A Bond B Years to maturity 5 years 10 years Coupon rate 5% 5% Par value 1000 1000 Yield to maturity 8% 6% Par amount owned R3,45 million R2 million Market value R30 367.59 (in 000’s) R18 528 (in 000’s) How do you work out the duration using Macauly's duration.
Given only the information provided, which bond would you suspect of experiencing the largest change in price if interest rates change? Coupon Current Price Remaining Term Bond A 5% $ 703.11 20 years Bond B 7% $ 932.05 10 years Bond C 11% $ 1,078.63 3 years Bond D 11% $ 1,296.89 20 years Question 19 options: Bond A Bond B Bond C Bond D
Consider the following two-bond portfolio of option-free bonds; Bond A Bond B Years to maturity 5 years 10 years Coupon rate 5% 5% Par value 1000 1000 Yield to maturity 8% 6% Par amount owned R3,45 million R2 million Market value R30 367.59 (in 000’s) R18 528 (in 000’s) Required: a) Without doing any calculations, which bond would have a higher duration b) Assuming that Bond A is an option-free bond, calculate the bond’s modified duration using Macauly’s Duration. c) Assume that the duration of Bond A and B is 4.2 and 7.5 respectively; determine the duration of the portfolio. Requires: Macauly's Duration Modified Duration Weight Bond A Weight Bond B Portfolio Duration
Given only the information provided, which bond would you suspect of having the lowest duration? Coupon Current Price Remaining Term Bond A 5% $ 703.11 20 years Bond B 7% $ 932.05 10 years Bond C 11% $ 1,078.63 3 years Bond D 11% $ 1,296.89 20 years Question 18 options: Bond A Bond B Bond C Bond D
A B C D E The following tables contain coupon, pricing, and other information for a series of bonds with different maturities. Bond Characteristics Settlement date Bond A 3/15/2023 Maturity date 11/14/2027 Bond B Bond C Bond D 3/15/2023 3/15/2023 3/15/2023 11/14/2027 11/14/2047 11/14/2047 Annual coupon rate 4.00% 4.00% 7.50% 7.50% Yield to maturity 5.00% 5.00% 5.00% 5.00% Redemption value (% of face value) 100 100 100 100 Coupon payments per year 1 2 1 2 Required: Note: Use cells A2 to E10 from the given information to complete this question. Using the information above, please calculate the flat (or quoted) price as well as days since last coupon, days in a coupon period, accrued interest, and finally the invoice price. All prices are expressed as percent of par. Flat price (% of par) Days since last coupon Days in coupon period Accrued interest (% of par) Invoice price (% of par) Bond A Bond B Bond C Bond D F
22) Consider the following two-bond portfolio of option-free bonds; Bond A Bond BYears to maturity 5 years 10 yearsCoupon rate 5% 5%Par value 1000 1000Yield to maturity 8% 6%Par amount owned R3,45 million R2 millionMarket value R30 367.59 (in 000’s) R18 528 (in 000’s) Required:a) Without doing any calculations, which bond would have a higher duration b) Assuming that Bond A is an option-free bond, calculate the bond’s modified duration using Macauly’s Duration. c) Assume that the duration of Bond A and B is 4.2 and 7.5 respectively; determine the duration of the portfolio.
The following information about bonds A, B, C, and D are given. Assume that bond prices admit noarbitrage opportunities. What is the convexity of Bond D?Cash Flow at the end ofBond Price Year 1 Year 2 Year 3A 91 100 0 0B 86 0 100 0C 78 0 0 100D ? 5 5 105
Consider the following two-bond portfolio of option-free bonds; Bond A Bond B Years to maturity 5 years 10 years Coupon rate 5% 5% Par value 1000 1000 Yield to maturity 8% 6% Par amount owned R3,45 million R2 million Market value R30 367.59 (in 000’s) R18 528 (in 000’s) Required: Without doing any calculations, which bond would have a higher duration Assuming that Bond A is an option-free bond, calculate the bond’s modified duration using Macauly’s Duration. Assume that the duration of Bond A and B is 4.2 and 7.5 respectively; determine the duration of the portfolio

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Bond A	Bond B
Years to maturity	5 years	10 years
Coupon rate	5%	5%
Par value	1000	1000
Yield to maturity	8%	6%
Par amount owned	R3,45 million	R2 million
Market value	R30 367.59 (in 000’s)	R18 528 (in 000’s)