The market - required rate of return is 14% and the coupon rate of a 10 - year bond is 10 %. the par value of the bond is $1000 . The bond will sell at a discount. . True False
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the par value of the bond is $1000 . The bond will sell at a discount. . True False
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- 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.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 5Consider a bond with a face value of $1,000 that sells for an initial price of $700. It will pay no coupons for the first nine years and will then pay 11% coupons for the remaining 29 years. Choose an equation showing the relationship between the price of the bond, the coupon (in dollars), and the yield to maturity. O A. B. O C. O D. 700 = 700 = 700 = 700 = 110 110 9 (1+i)⁹ (1+i)⁹+1 + 110 + i) ⁹ + 1 (1 + 1,000 (1+i) 29-9 1,000 (1 + i) 9 +29 + +...+ 110 (1+i) 9+2 + 110 (1 + i)9+29-1 110 + (1 + i) ⁹ + 110 (1+i)9 +29 9+29-1 + 110 (1 + i)9 +29 + 1,000 (1+i) 9+29
- Suppose that your firm issued a bond with 10 years until maturity, a face value of $1000, and a coupon rate of 7% (annual payments). The yield to maturity on this bond when it was issued was 6%. For questions e-g, assume that this bond DOES NOT pay any coupon a) What was its price when it was issued? b) For this zero-coupon bond, suppose it is actually sold for $500, what should the YTM be?Consider a bond with a face value of $5,000 that pays a coupon of $200 for 5 years. Suppose the bond is purchased at $5,000, and can be resold next year for $4,800. What is the rate of return and the yield to maturity of the bond? rate of return = 4%, yield to maturity = 0% rate of return = 0%, yield to maturity = 4% rate of return = 8%, yield to maturity = - 4% rate of return = 4%, yield to maturity = 4%Bond A is a premium bond with a 9 percent coupon. Bond B is a 5 percent coupon bond currently selling at a discount. Both bonds make annual payments, have a YTM of 6 percent, and have five years to maturity. The face value is $1000 for both bonds. a. Why is the capital gain yield of the premium bond different from that of the discount bond? Which bond is better in terms of yields? b. What is the holding period return for each bond, if both bonds are held over the next year and sold at the year ned?
- A bond has 10 years to maturity, a $1,000 par value, coupon payments of $100, has 5 years to maturity, and is not expected to default. The bond should sell at a premium if market interest rates are below 10%. True False2. Consider a bond with a 7.5% annual coupon rate and a face value of $1,000. Calculate the bond price and duration & show your work. Years to Maturity Interest rate Bond Price Duration 4 6. 6. 9. What relationship do you observe between yield to maturity and the current market value? What is the relationship between YTM and duration?A bond that pays interest semiannually has a coupon rate of 5.08 percent and a current yield of 5.37 percent. The par value is $1,000. What is the bond's price?
- A. You have a one-year zero coupon bond that pays 1,000 which price today is 909.09. You have a two-year coupon bond with a principal value of 2,000 and coupon rate of 10%. Its price is 1,845.334. Determine what is the term structure of interest rates for years 1 and 2. Draw the curve. B. Compute the duration for the coupon bond and for the zero coupon bond and explain how to compute the yield to maturity (only set the equation in the last case) for the coupon bond. C. Assume the YTM for the coupon bond is 14.74%. What is the modified duration for the two bonds? D. What would the new price of the two bonds be if the yield increases by 5%?Consider the following fixed income security: Par: $1000 Coupon rate: 4% Maturity: 5 years YTM: 3.5% 7. What is the value of this bond? 8. What is Macauley’s Duration of this bond? 9. Were you to replicate the bond by holding a 1-year maturity Zero and a perpetuity at 4%, what percentage would you invest in the Zeros to match the bond?9Consider a 25-year bond with a face value of $1,000 that has a coupon rate of 5.8%, with semiannual payments. a. What is the coupon payment for this bond? b. Draw the cash flows for the bond on a timeline. a. What is the coupon payment for this bond? The coupon payment for this bond is $ *** (Round to the nearest cent.)