The following table shows the prices of a sample of Treasury bonds, all of which have coupon rates of zero. Each bond makes a single payment at maturity. Price (% of face value) 98.752% Years to Maturity 1 2 95.251 3 91.444 4 87.380 a. What is the 1-year interest rate? Note: Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. b. What is the 2-year interest rate? Note: Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. c. What is the 3-year interest rate? Note: Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. d. What is the 4-year interest rate? Note: Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. e. Is the yield curve upward-sloping, downward-sloping, or flat? f. Is this the usual shape of the yield curve? a. Interest rate b. Interest rate c. Interest rate d. Interest rate e. Is the yield curve upward-sloping, downward-sloping, or flat? f. Is this the usual shape of the yield curve?

The following table shows the prices of a sample of Treasury bonds, all of which have coupon rates of zero. Each bond makes a single payment at maturity. Price (% of face value) 98.752% Years to Maturity 1 2 95.251 3 91.444 4 87.380 a. What is the 1-year interest rate? Note: Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. b. What is the 2-year interest rate? Note: Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. c. What is the 3-year interest rate? Note: Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. d. What is the 4-year interest rate? Note: Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. e. Is the yield curve upward-sloping, downward-sloping, or flat? f. Is this the usual shape of the yield curve? a. Interest rate b. Interest rate c. Interest rate d. Interest rate e. Is the yield curve upward-sloping, downward-sloping, or flat? f. Is this the usual shape of the yield curve?

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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The following table summarizes prices of various default-free zero-coupon bonds ( $100 face value): Maturity (years) 1 2 3 4 5 {:[" Price (per "$100],[" face value) "]:} $96.33 $91.98 $87.41 $82.53 $77.41 a. Compute the yield to maturity for each bond. b. Plot the zero-coupon yield curve (for the first five years). c. Is the yield curve upward-sloping, downward-sloping, or flat? Note: Assume annual compounding. a. Compute the yield to maturity for each bond. The yield on the 1-year bond is %. (Round to two decimal places.) The yield on the 2-year bond is %. (Round to two decimal places.) The yield on the 3-year bond is %. (Round to two decimal places.) The yield on the 4-year bond is enter your response here%. (Round to two decimal places.) Part 5 The yield on the 5-year bond is enter your response here%. (Round to two decimal places.) Note:- Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism. Answer completely. You will…
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 Price $983.78 865.89 797.92 732.00 660.24 Required: a. Calculate the forward rate of interest for each year. b. How could you construct a 1-year forward loan beginning in year 3? c. How could you construct a 1-year forward loan beginning in year 4?
The following table shows the prices of a sample of Treasury bonds, all of which have coupon rates of zero. Each bond makes a single payment at maturity. Years to Maturity Price (% of face value) 1 98.052% 2 94.551 3 90.744 4 86.680 What is the 1-year interest rate? What is the 3-year interest rate? What is the 4-year interest rate? Is the yield curve upward-sloping, downward-sloping, or flat? Is this the usual shape of the yield curve?
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) Price 1 $ 998.78 2 880.89 3 815.92 4 752.40 5 685.70 a. Calculate the forward rate of interest for each year. (Round your answers to 2 decimal places.) b. How could you construct a 1-year forward loan beginning in year 3? (Round your Rate of synthetic loan answer to 2 decimal places.) c. How could you construct a 1-year forward loan beginning in year 4? (Round your answers to 2 decimal places.)
Suppose the returns on long-term government bonds are normally distributed. Assume long-term government bonds have a mean return of 6.1 percent and a standard deviation of 9.8 percent. What is the approximate probability that your return on these bonds will be less than −3.7 percent in a given year? Use the NORMDIST function in Excel® to answer this question. Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16. What range of returns would you expect to see 95 percent of the time? Note: A negative answer should be indicated by a minus sign. Enter your answers from lowest to highest. Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16. What range would you expect to see 99 percent of the time? Note: A negative answer should be indicated by a minus sign. Enter your answers from lowest to highest. Do not round intermediate calculations and enter…
The following table summarizes prices of various default-free zero-coupon bonds ($100 face value): (Click on the following icon in order to copy its contents into a spreadsheet.) Maturity (years) 1 2 3 4 5 Price (per $100 face value) $95.51 $91.05 $86.38 $81.65 $76.51 a. Compute the yield to maturity for each bond. b. Plot the zero-coupon yield curve (for the first five years). c. Is the yield curve upward sloping, downward sloping, or flat? Note: Assume annual compounding. Question content area bottom Part 1 a. Compute the yield to maturity for each bond. The yield on the 1-year bond is enter your response here%. (Round to two decimal places.)
Consider the following bonds: . What is the percentage change in the price of each bond if its yield to maturity falls from 6.3% to 5.3%? The price of bond A at 6.3% YTM per $100 face value is $ (Round to the nearest cent.) - X Data table (Click on the following icon g in order to copy its contents into a spreadsheet.) Bond Coupon Rate (annual payments) Maturity (years) A 0.0% 15 В 0.0% 10 3.6% 15 8.4% 10 Print Done
Bond J has a coupon of 7.8 percent. Bond K has a coupon of 11.8 percent. Both bonds have 12 years to maturity and have a YTM of 8.7 percent. a. If interest rates suddenly rise by 2.4 percent, what is the percentage price change of these bonds? (A negative value should be indicated by a minus sign. Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places.) %A in Price Bond J Bond K % % b. If interest rates suddenly fall by 2.4 percent, what is the percentage price change of these bonds? (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places.) Bond J Bond K %A in Price % 18.63%
You are given the following information. All bonds are from the same issuer (same credit risk). Bond Coupon Rate Maturity Price ($) 6% 1036.17 5% 2 1041.49 C 6% 3 1074.21 All coupon payments are annual and face values are $1000. Answer the following and express rates as a %, to 2 decimal places a) Determine the 1-, 2- and 3-year spot rates from the given prices (Use the Bootstrapping method). 1- Year Spot rate is 2- Year Spot rate is 3- Year Spot rate is b) Compute the implied annual forward rate from year one to year two, i.e., f2 --> c) Compute the implied annual forward rate from year two to year three, i.e., f3 -->
Bond C has a coupon of 5.2 percent. Bond D has a coupon of 9.2 percent. Both bonds have 15 years to maturity and have a YTM of 7.4 percent. a. If interest rates suddenly rise by 1.6 percent, what is the percentage price change of these bonds? (A negative value should be indicated by a minus sign. Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places.) b. If interest rates suddenly fall by 1.6 percent, what is the percentage price change of these bonds? (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places.) c- What is your conclusion?
The following is a list of prices for zero-coupon bonds of various maturities. a. Calculate the yield to maturity for a bond with a maturity of (i) one year; (ii) two years; (iii) three years; (iv) four years. Assume annual coupon payments. (Do not round intermediate calculations. Round your answers to 2 decimal places.) Maturity (Years) 1 2 3 4 Maturity (years) 1 2 3 4 Maturity (Years) 2 3 4 $ $ $ $ b. Calculate the forward rate for (i) the second year; (ii) the third year; (iii) the fourth year. Assume annual coupon payments. (Do not round intermediate calculations. Round your answers to 2 decimal places.) $ $ $ Price of Bond 983.40 918.47 867.62 774.16 Price of Bond $983.40 918.47 867.62 774.16 Price of Bond YTM 918.47 867.62 774.16 % % % % Forward Rate % % % #
The following table shows some data for three bonds. In each case, the bond has a coupon of zero. The face value of each bond is $1,000. Bond Price Maturity (Years) Yield to Maturity A $ 230 20 B с 230 17 10% 9 What is the yield to maturity of bond A? Note: Do not round intermediate calculations. Enter your answer as a percent rounded to 3 decimal places. Assume annual compounding. What is the maturity of B? Note: Do not round intermediate calculations. Round your answer to 2 decimal places. Assume annual compounding. What is the price of C? Note: Do not round intermediate calculations. Round your answer to 2 decimal places. Assume annual compounding.

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