2) You have a liability of 1,000 at the end of year 1 and another liability of L at the end of year 2. You create a portfolio of assets that exactly match your liabilities using the following available bonds with annual coupons: Coupon Rate Yield Rate 3% 6% Term of bond 1-year 2-year 5% 8% Find L if you invested 932 to purchase the 1-year bond.
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- Suppose you have the following liabilities: Liability 1: A one-time liability maturing in 4 years with the present value of $100. Liability 2: A one-time liability maturing in 8 years with the present value of $100. To immunize your liabilities using the following two bonds, what would be the weights of the two bonds in your immunizing bond portfolio? Bond A: A zero-coupon bond with a face value of $100 and a time to maturity of 3 years. Bond B: A zero-coupon bond with a face value of $100 and a time to maturity of 12 years. A. 33% in Bond A and 67% in bond B B. 70% in Bond A and 30% in bond B C. 30% in Bond A and 70% in bond B D. 67% in Bond A and 33% in bond B E. 50% in Bond A and 50% in bond BState one short term and one long term financial goals of yours. Assume, you have purchased a bond with $200 discount, and it has 5 years maturity with 6% coupon. If the face value of the bond is $2500, calculate YTM.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 Show Transcribed Text B) How could you construct a 1-year forward loan beginning in year 3? (Face Value) C) How could you construct a 1-year forward loan beginning in year 4? (Face Value) Required A Required B Complete this question by entering your answers in the tabs below. Face value Rate of synthetic loan → Show Transcribed Text Price $ 970.93 898.39 836.92 How could you construct a 1-year forward loan beginning in year 3? Note: Round your Rate of synthetic loan answer to 2 decimal places. Required A 776.20 685.42 Required B Face value Rate of synthetic loan Required C 7.85 % Required C How could you construct a 1-year forward loan beginning in year 4? Note: Round your Rate of synthetic loan answer to 2 decimal places. Ċ 13.29 %
- A person purchased a 10-year, 5 percent coupon (semiannual payments) bond for $1,050.00, what is the (annual) yield-to-maturity? Show the steps in solving it using Financial Calculator.A bond is currently selling for $1040. It pays the amounts listed in the picture at the ends of the next six years. The yield of the bond is the interest rate that would make the NPV of the bond’s payments equal to the bond’s price. Use Excel’s Goal Seek tool to find the yield of the bond.You want to form a bond portfolio that pays $100 every six months, for the next year. That is, $100 in 0.5 years and $100 in 1 year. To achieve this goal, you will purchase Bonds A and B, which have a face value of $100 and pay semi-annual coupons. The following information is available: Bond A • Coupon rate (APR): 4.3% Maturity: 1 year Bond B • Coupon rate (APR): 9.5% • Maturity: 1 year Calculate the number of units you must buy of Bond B to achieve your goal. Express your answer as a number with two decimals. E.g. If your answer is 102.544, then enter it as 102.54
- For a company, you plan to buy the following bond: Time to maturity, 6 years; coupon rate, 8%; Coupon payment, annual; Market interest rate, 8%; Face value, $1,000. Using Excel, calculate the duration of the bond. Using Excel, calculate the accumulated value of invested payment(or receipt) when you find market interest rate a year later is now 8%, 9%, and 7%, respectively. Using Excel, calculate geometric average rate of return (or realized compound return).Consider a 10-year bond with a face value of $1,000 that has a coupon rate of 5.5%, with semiannual payments. a. What is the coupon payment for this bond? b. Draw the cash flows for the bond on a timelineCalculate the duration (and price ) of a bond with the following characteristics: A semi - annual payment bond with a $1,000 face value, a 4.5% coupon rate, a 7.8% YTM, and 8 years to maturity. Show your table of calculations or show Excel inputs if using the Excel commands.
- 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?Calculate the duration (and price) of a bond with the following characteristics: A semi-annual payment bond with a $1,000 face value, a 4,5% coupon rate, a 7.8% YTM, and 8 years to maturity. Show your table of calculations or show Excel inputs if using the Excel commands.What is the duration of the following bond:$1,000par value,6%annual coupon, 4 years to maturity, and yield to maturity of6.5%? You will need your answer for the next question. In the prior question, what is the present value of the bond?