You own government bonds with a face value of $2 million. The bonds mature 6 years and 3 months from today and have a coupon rate of 12%, paid semiannually. The next coupon will be paid in three months. The current yield on these bonds is 6% p.a. compounded semi-annually. How much are the bonds worth today? (Hint: You want to find the present value. Notice the coupon rate is higher than the market rate. Bonds should be at a premium.)
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- A bond with a face value of $5,000 pays interest of 8% per year. This bond will be redeemed at par value at the end of its 20-year life, and the first interest payment is due one year from now. Solve, (a) How much should be paid now for this bond in order to receive a yield of 10% per year on the investment? (b) If this bond is purchased now for $4,600, what annual yield would the buyer receive?A government bond matures in 7 years, makes annual coupon payments of 5.1% and offers a yield of 3.1% annually compounded. Assume face value is $1,000. (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.) a. Suppose that one year later the bond still yields 3.1%. What return has the bondholder earned over the 12-month period? Rate of return b. Now suppose that the bond yields 2.1% at the end of the year. What return did the bondholder earn in this case? Rate of returnYou buy a bond and hold it for one year. According to the information below... What is your holding period return? (Keep in mind you received coupon payments over the course of the year and that you get one year closer to maturity after the year passes by) Face Value: $1,000 YTM1 (Yield of comparable bonds) at date of purchase: 4% YTM2 (Yield of comparable bonds) at date of sale, end of the year: 6% Coupon: 4% Maturity: 26 years A
- A six-year government bond makes annual coupon payments of 5% and offers a yield of 3% annually compounded. Assume face value is $1,000. a. Suppose that one year later the bond still yields 3%. What return has the bondholder earned over the 12-month period? b. Now suppose that the bond yields 2% at the end of the year. What return did the bondholder earn in this case? Note:- Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism. Answer completely. You will get up vote for sure.A government bond matures in 8 years, makes annual coupon payments of 4.2% and offers a yield of 2.2% annually compounded. Assume face value is $1,000. (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.) a. Suppose that one year later the bond still yields 2.2%. What return has the bondholder earned over the 12-month period? b. Now suppose that the bond yields 1.2% at the end of the year. What return did the bondholder earn in this case?Consider a bond (with par value = $1,000) paying a coupon rate of 10% per year semiannually when the market interest rate is only 4% per half-year. The bond has three years until maturity. Required: a. Find the bond's price today and six months from now after the next coupon is paid. b. What is the total (6-month) rate of return on the bond? Complete this question by entering your answers in the tabs below. Required A Required B Find the bond's price today and six months from now after the next coupon is paid. Note: Round your answers to 2 decimal places. Current price Price after six months $ $ 1,052.42 1,044.52
- You will be paying $10,000 a year in tuition expenses at the end of the next two years. Bonds currently yield 8%.a. What is the present value and duration of your obligation?b. What maturity zero-coupon bond would immunize your obligation? c. Suppose you buy a zero-coupon bond with value and duration equal to your obligation. Now suppose that rates immediately increase to 9%. What happens to your net position, that is, to the difference between the value of the bond and that of your tuition obligation?d. What if rates fall immediately to 7%?A 10-year government bond has face value of OR 200 and a coupon rate of 6% paid semiannually. Assume that the interest rate is equal to 8% per year. What is the bond’s price? What is the reason for the difference in price on an annual and semiannually basis? Discuss the role of financial managers.A 10-year government bond has a face value of £100 and an annual coupon rate of 5%. Assume that the interest rate is equal to 6% per year. (a) Calculate the bond’s present value if it pays the interest annually, and also the present value if it pays semi-annually. (b) Calculate the market price of the bond when the interest rate changes to 8% please explain it on a paper with formula, not by excel.
- A bond pays $11,000 per year for the next 10 years. The bond costs $99,000 now. Inflation is expected to be 6 percent over the next 10 years. Answer parts (a) and (b). a. What is the current dollar internal rate of return? Use linear interpolation with x₁ = 1.95% and x₂ = 2.00% to find your answer. The current dollar internal rate of return is percent. (Type an integer or decimal rounded to two decimal places as needed.)A 5-year long-term corporate bond yields 10%. The real risk-free rate is 2%. Inflation is forecasted to average 2% a year for the next 5 years. The maturity risk premium is estimated to be 1%(t-3), where t is the maturity of the bond.What will be the nominal rate of the long-term 5-year government security? (In percentage, type the percentage sign on your answer)You will be paying $8,600 a year In tultion expenses at the end of the next two years. Bonds currently yleld 7%. Q. What is the present value and duration of your obligation? b. What maturity zero-coupon bond would Immunize your obligation? c. Suppose you buy a zero-coupon bond with value and duration equal to your obligation. Now suppose that rates immediately Increase to 9%. What happens to your net position, that is, to the difference between the value of the bond and that of your tultion obligation? d. What if rates fall Immediately to 5% ? Complete this question by entering your answers in the tabs below. Required A Required B Required C Required D What is the present value and duration of your obligation? (Do not round intermediate calculations. Round "Present value" to 2 decimal places and "Duration" to 4 decimal places.) \table[[,,,],[Present value,,,,,],[Duration,,years,,,]]