You have the following information regarding the bond ABC. Semiannual $25 payments YTM 8% Maturity (in years) 4 Par value $1,000 Let's assume the modified duration of this bond is 4. Based on this assumption and using the modified duration, estimate the price of the bond after a 65-basis-point decrease in interest rates.

You have the following information regarding the bond ABC. Semiannual $25 payments YTM 8% Maturity (in years) 4 Par value $1,000 Let's assume the modified duration of this bond is 4. Based on this assumption and using the modified duration, estimate the price of the bond after a 65-basis-point decrease in interest rates.

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

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Bonds have a maturity risk premium that can be modeled as the following:MRP = (t-1) 0.3%were t represents the years to maturity. What is the Maturity risk premium of a bond that matures in 8 years? answer in % without the symbol
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A bond quotes a rate of return of 5% and will pay $1,000 in one year with a probability of 42% and $0 with a probability of 58%. part A)What is the time premium? part B)What is the default premium?
Consider following characteristic of a bond Time to Maturity: 5 years Coupon Payment: Semi-ainual Coupon Rate: Par Value: YTM (in annual): 3.5% 6.2% $1,000 15. What the Macaulay's duration and modified duration for 1% yield change for this bond given the information? 国

The term structure of interest rates has the following annual effective rates of interest for zero-coupon bonds. Maturity (Year) Annual Effective Yield on Zero-Coupon Bond 1 0.05 0.0525 0.055 3 At time 0, find the one-year forward one-year deferred and one-year forward two-year deferred annual effective forward rates of interest. For an interest only loan, find the level interest payment at the end of each year for three years that has the same present value as the payments based on the forward rates at those times.
Assume that the real risk free rate is 2% and the average expected inflation rate is 3% for each future year. The default risk premium and the liquidity premium for bond x are each 1% and the applicable Maturity Risk premium is 2% what is bond x’s interest rate. Round to 2 decimal places
What are the Modified Duration and Macaulay Duration of the following bond? Coupon Rate = 8% (Semi-annually paid) YTM = 9% Maturity = 2 Years Par Value = 1,000 (Hint: this question is similar to Example 1 and Example 2 on slides) ModD = 1.886 and MacD = 1.805 ModD = 1.784 and MacD = 1.954 ModD = 1.954 and MacD = 1.784 ModD = 1.805 and MacD = 1.886
A bond quotes a rate of return of 5% and will pay $1,000 in one year with a probability of 42% and $0 with a probability of 58%. part A)What is the time premium? part B)What is the default premium? I need full explanation .. No plagiarism plzz
Suppose a 10% 3years bond with a FV of $1000 Spot rates r1= 10%, r2= 12%, r3=13%. Calculate the forward rate required to calculate the bond price using the forward rate 1f2
An investor wants to find the duration of a(n) 15-year, 5% semiannual pay, noncallable bond that's currently priced in the market at $518.23, to yield 12%. 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.) →
Consider the following risk-free bonds available for sale in the bond market (assume annual +Coupons). Bond's maturity Ask Price (per $100 of Coupon rate (in %) face value 1-year bond 100.0040 0.125% 2-year bond 101.2100 2% 3-year bond 101.2140 1.625% Construct the term structure of interest rates for these three periods. b. Your company plans to issue three-year maturity coupon bonds. Based on its excellent credit rating, your company pays a low constant 3% risk premium over the relevant term-structure rates. You plan to issue bonds priced at par (i.e. price = face value). At what level should you plan to set the coupon on your bond to justify this price? c. Now assume that your company wishes to issue 3-year zero coupon bonds. At what price will these bonds sell?
Vhat is the yield of each of the following bonds, if interest (coupon) is paid semiannually? 6% 20 8.02 % 5800.00 d of the following bond if interest (coupon) is 1 Data Table - X Years to Coupon Rate Matunty 12% 10 (Click on the following icon n in order to copy its contents into a spreadsheet.) eld of the following bond if interest (coupon) is Par Value $1,000.00 Yield to Maturity Matunty Doupon Rale 6% Price $800.00 $1,000.00 S3.110.00 $1.130.00 క Noturty 20 10 Coupon ato $1.000.00 12% 7% 20 $5,000.00 $1.000.00 7% 20 8% yield of the following bond if interest (coupon) is Yoars to Coupon Hate Print Done Maturity 00 8%

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