12. Treasury Bills (LO1, CFA2) A Treasury bill purchased in December 2016 has 55 days until maturity and a bank discount yield of 2.48 percent. What is the price of the bill as a percentage of face value? What is the bond equivalent yield?
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- Rework part (f), assuming that Annie holds the bond for 10 years and sells it when the required return is 7.0%. Compare your finding to that in part (f), and comment on the bond's maturity risk. PV= 1,000 N=10 I/Y= 7% Assume that Annie buys the bond at its current price of $983.80 and holds it until maturity. What will her current yield and yield to maturity (YTM) be, assuming annual interest? After evaluating all of the issues raised above, what recommendation would you give Annie with regard to her proposed investment in the Atilier Industries bonds?Making the assumption of no compounding interest , suppose you purchase a perpetuity bond from CosoNostra Pizza Inc. for $ 4,000 with an annual coupon rate of 3 % . Specify all answers to the nearest dollar , and assume a discount rate equal to that of the current interest rate . Changes in the economy push interest rates up from 3 % to 5 % . For how much can you sell your bond following this change in market interest rates ?A 30-year maturity bond with face value of $1,000 makes semiannual coupon payments and has a coupon rate of 8%. Note: Do not round intermediate calculations. Enter your answers as a percent rounded to 3 decimal places. What is the yield to maturity if the bond is selling for $900? What is the yield to maturity if the bond is selling for $1,000? What is the yield to maturity if the bond is selling for $1,100?
- What is the yield to maturity on a $10,000-face-valuediscount bond, maturing in one year, which sells for$9,523.81?Calculate the present value of a $1,300 discount bondwith seven years to maturity if the yield to maturity is 8%.Answer the question based on the following information for a bond having no expiration date: bond price = $1,000; bond fixed annual interest payment = $100; bond annual interest yield = 10 percent. If the price of this bond increases to $2,500, the interest yield will
- A zero-coupon bond is a bond that is sold for less than its face value (that is, it is discounted) and has no periodic interest payments. Instead, the bond is redeemed for its face value at maturity. Thus, in this sense, interest is paid at maturity. Suppose that a zero-coupon bond sells for $8,800 and can be redeemed in 20-years for its face value of $48,000. What is the annual compound rate of return? Annual compound rate = % (Round to two decimal places as needed.)Question 3 (2 marks): The Cash Grab Credit Card Company charges a nominal 28 percent interest on overdue accounts, compounded daily. What is the effective annual interest rate? Show your answer to two decimal places of a percent.1. What is the present value of $500.00 to be paid in two years if the annual interest rate is 5%? $___ 2. The current interest rate on a 10-year treasury note (with face value = $100 and annual coupon rate = 2.625%) is 3.37%. The buyer of this note will receive $ ____ payment from the treasury every year before maturity while holding the bond.
- What is the yield to maturity (YTM) on a simple loan for $1,000 that requires a repayment of $2,000 in five years' time? The yield to maturity is %. (Round your response to one decimal place.)What is the discount yield, bond equivalent yield, and effective annual return on a $7 million commercial paper issue that currently sells at 98.75 percent of its face value and is 122 days from maturity? (Use 360 days for discount yield and 365 days in a year for bond equivalent yield and effective annual return. Do not round intermediate calculations. Round your percentage answers to 3 decimal places. (e.g., 32.161))12. Which of the following statements is generally true for all types of bonds? A) The longer the maturity of the bond, the greater the rate of return as a result of an increase in interest rates. B) Even though the bond has a substantial initial interest rate, its return can be negative if the interest rate increases. C) Prices and returns of short-term bonds are more volatile than long-term bonds. D) A decrease in interest rates results in capital losses for bonds with a longer duration/tenor than the holding period. 13. In the following situations, which one would you choose as a lender? A) The interest rate is 9 percent and the expected inflation rate is 7 percent. B) The interest rate is 4 percent and the expected inflation rate is 1 percent. C) The interest rate is 13 percent and the expected inflation rate is 15 percent. D) The interest rate is 25 percent and the expected inflation rate is 50 percent. 14. Assuming ceteris paribus, the coupon rate of the bond, the duration of the…