The function s(t) = 0.035 +0.0031 gives the effective annual rate of a zero coupon bond of maturity f, with tin years. Find the price of a 2 year coupon bond with semiannual coupons of 7.5% and a face/redemption value of $700,000.
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- If you have a coupon bond, its face value is $1,000 and the coupon rate is 4%. Complete the following table, then calculate the rate of return for the bond. If you know that it was purchased at the nominal value, comment on the results. due date return at maturity the price 2 0.02 3 0.04 5 0.06 Present Value Annuity value % n value % n 0.961 0.02 2 1.97 0.02 2 0.925 0.04 2 1.89 0.04 2 0.889 0.04 3 2.78 0.04 3 0.906 0.02 5 4.71 0.02 5 0.747 0.06 5 4.21 0.06 5Compute the Macaulay duration, modified duration and convexity of a coupon bond with face value F = 100, current price P 100, current price P = 92, maturity T I = 8% 4 years, that pays a semi-annual coupon of C =Suppose you are given the following information about the default-free, coupon-paying yield curve: Maturity (years) Coupon rate (annual payment) YTM 1 0.00% 2.587% a. Use arbitrage to determine the yield to maturity of a two-year zero-coupon bond. b. What is the zero-coupon yield curve for years 1 through 4? Note: Assume annual compounding. 2 11.00% 4.008% a. Use arbitrage to determine the yield to maturity of a two-year zero-coupon bond. The yield to maturity of a two-year, zero-coupon bond is %. (Round to two decimal places.) b. What is the zero-coupon yield curve for years 1 through 4? The yield to maturity for the three-year and four-year zero-coupon bond is found in the same manner as the two-year zero-coupon bond. The yield to maturity on the three-year, zero-coupon bond is %. (Round to two decimal places.) The yield to maturity on the four-year, zero-coupon bond is %. (Round to two decimal places.) Which graph best depicts the yield curve of the zero-coupon bonds? (Select the…
- Consider a coupon bond with an 8% annual coupon rate, a 10% interest rate, and a$1000 face value. The bond will mature in 4 years. What is the duration of this bond? Duration isdefined as a weighted average of the maturities of the cash payments. Suppose the weightassigned to the maturity of 1 year is W. Show your work A: Duration=2.28 and W=7.77%B: Duration=3.56 and W=20.5%C. Duration=3.56 and W=23.1%D. Duration=3.56 and W=7.77%A newly issued bond with 1 year to maturity has a price of $1,000, which equals its face value. The coupon rate is 15% and the probability of default in 1 year is 35%. The bond’s payoff in default will be 65% of its face value. a. Calculate the bond’s expected return. b. Use a data table to show the expected return as a function of the recovery percentage and the price of the bond. Please show how you got part B using all functions.suppose a 30 year, pay coupon of 4% is priced to yield 5%. par = 1000. the bond pays its coupon annually. calculate the instrinsic value of the bond. decide whether the bond is at premium or discount? please show the calculation using excel
- 2. A bond pays semi-annual coupons with c(2) = .085. Assume the face value equals $10,000 and matures in 4 years. The YTM of the bond is given as i(2) = .07. Construct the amortization table for this bond. 3. Calculate the price of the bond in problem #2 above at time t=1/2.The function s(t) = 0.16 − 0.04 e− t/4 provides the term structure of effective annual rates of zero coupon bonds of maturity t, with t in years. Find the following: (a) The effective annual rate of a 3 year zero coupon bond. (b) The 2-year forward effective annual rate for a one year period. (c) The forward effective annual rate for a one year period, 3 years forward. (d) The 3-year forward effective annual rate for a 3 month period. (e) The forward effective annual rate for a one day period, 3 years forward (the “overnight” rate).(Use 1/365 for a one-day period.)Consider a coupon bond with a face value of $100, a coupon rate of 25%, a time-to-maturity of two years and a price of $121.97. What is its yield-to-maturity?(Use the quadratic formula)
- Suppose the continuous forward rate is r(t) = 0.04 + 0.001t when a 8 year zero coupon bond is purchased. Six months later the forward rate is r(t) = 0.03 + 0.0013t and bond is sold. What is the return?A bond currently sells for P850. It has an 8-year maturity, an annual coupon of P80, and a par value of P1,000. What is its yield to maturity?Consider an inverse floating rate coupon bond with 1 year remaining to maturity. On maturity, bondholders are expected to receive $100 face value. Coupons are paid quarterly and the current 3-mth LIBOR observed rate is 5.234% p.a. The annual coupon rate is specified as: Annual coupon rate = 20% p.a. – 30 where Cis the annual 3-mth LIBOR rate. Assume, for simplicity, that the annual 3-mth LIBOR rate will never exceed 6.67% p.a. (so that the annual coupon rate defined above is always a positive number). The following table shows the current LIBOR continuously compounded rate with different maturities: Maturity LIBOR Maturity LIBOR 5.0% р.а. 5.1% р.а. 5.2% р.а. 5.3% p.a. 5.3% p,a. 5.4% p.a. 5.5% p.a. 5.5% р.a. 5.6% p.a. 5.7% р.a. 5.8% p.a. 1 7 2 8 3 4 10 11 6 12 5.9% p.a For example, the 1-mth LIBOR is 5.0% p.a. compounded continuously. You can treat the LIBOR rates presented in table above as the discount rates/spot rates with different maturities. Required: What is the current price of…