4. Consider the following zero-coupon yields on default free securities: r₁= 5.80%, r2 = 5.50%, r3 = 5.20%, r4 = 5.00%, r5 = 4.80%, where rn represents the zero-coupon yield for maturity n. The yield to maturity (YTM) of a 3 year default free security with a face value of $1,000 and an annual coupon rate of 6% is closest to: A) 5.5% B) 5.8% C) 5.7% D) 5.2% E) 6.8%

4. Consider the following zero-coupon yields on default free securities: r₁= 5.80%, r2 = 5.50%, r3 = 5.20%, r4 = 5.00%, r5 = 4.80%, where rn represents the zero-coupon yield for maturity n. The yield to maturity (YTM) of a 3 year default free security with a face value of $1,000 and an annual coupon rate of 6% is closest to: A) 5.5% B) 5.8% C) 5.7% D) 5.2% E) 6.8%

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter8: Analysis Of Risk And Return

Section: Chapter Questions

Problem 20P

See similar textbooks

Similar questions

Suppose there is a large probability that L will default on its debt. For the purpose of this example, assume that the value of Ls operations is 4 million (the value of its debt plus equity). Assume also that its debt consists of 1-year, zero coupon bonds with a face value of 2 million. Finally, assume that Ls volatility, , is 0.60 and that the risk-free rate rRF is 6%.
Assume that Temp Force has a beta coefficient of 1.2, that the risk-free rate (the yield on T-bonds) is 7.0%, and that the market risk premium is 5%. What is the required rate of return on the firms stock?
Assume the zero-coupon yields on default-free securities are as summarized in the following table: Maturity 1 year 2 years 3 years 4 years 5 years Zero-Coupon Yields 7.00% 7.60% 7.90% 8.30% 8.70% What is the maturity of a default-free security with annual coupon payments and a yield to maturity of 7.00%? Why? What is the maturity of a default-free security with annual coupon payments and a yield to maturity of 7.00%? A. One year B. Two years C. Three years D. Four years E. Five years
****THIS IS A DIFFERENT QUESTION********* Assume the zero-coupon yields on default-free securities are as summarized in the following table: Maturity 1 year 2 years 3 years 4 years 5 years Zero-Coupon Yields 5.70% 6.20% 6.40% 6.60% 6.80% What is the price of a three-year, default-free security with a face value of $1,000 and an annual coupon rate of 3%? What is the yield to maturity for this bond? What is the price of a three-year, default-free security with a face value of $1,000 and an annual coupon rate of 3%? The price is $______________ (Round to the nearest cent.)
Assume the zero-coupon yields on default-free securities are as summarized in the following table: Maturity(Years) 1 2 3 4 5 YTM for this bond 6.20% 6.80% 7.00% 7.30% 7.60% What is the price of a three-year, default-free security with a face value of $1,000 and an annual coupon rate of 7%? What is the yield to maturity for this bond?
Assume the zero-coupon yields on default-free securities are as summarized in the following table: Maturity 1 year 2 years 3 years 4 years 5 years Zero-Coupon Yields 4.0% 4.3% 4.5% 4.7% 4.8% What is the price today of a two-year, default-free security with a face value of $1,000 and an annual coupon rate of 6%? Does this bond trade at adiscount, at par, or at a premium? What is the price today of a two-year, default-free security with a face value of $1,000 and an annual coupon rate of 6%? The price is $_____. (Round to the nearest cent.)
Consider the following zero‐coupon yields on default free securities: Maturity (years) 1 2 3 4 5 Zero‐Coupon YTM 5.80% 5.50% 5.20% 5.00% 4.80% The price today of a 3 year default free security with a face value of $1000 and an annual coupon rate of 6% is closest to: A. $1024.36 B. $1021 C. $1013 D. $1032
Assume the zero-coupon yields on default-free securities are as summarized in the following table: Maturity 1 year 2 years 3 years 4 years 5 years Zero-Coupon Yields 7.00% 7.60% 7.90% 8.20% 8.30% Consider a four-year, default-free security with annual coupon payments and a face value of $1,000 that is issued at par. What is the coupon rate of this bond? The par coupon rate is _____%
The yield on 1-year Treasury securities is 6%, 2-year securities yield 6.2%, 3-year securities yield 6.3%, and 4-year securities yield 6.5%. There is no maturity risk premium. A.) Using expectations theory and geometric averages, forecast the yields on a 1-year security, 1 year from now. B.) Using expectations theory and geometric averages, forecast the yields on a 1-year security, 2 years from now. C.) Using expectations theory and geometric averages, forecast the yields on a 2-year security, 1 year from now.
Assume the zero-coupon yields on default-free securities are as summarized in the following table: (Click on the following icon in order to copy its contents into a spreadsheet.) Maturity (years) 1 2 3 4 5 Zero-coupon YTM 4.30% 4.70% 5.10% 5.30% 5.50% What is the price of a five-year, zero-coupon, default-free security with a face value of $1,000 Question content area bottom Part 1 The price is ___$enter your response here.(Round to the nearest cent.)
step by step solution 1) Consider the following zero-coupon yields on default-free securities: Maturity (years) 1 2 3 4 5 Zero-Coupon YTM 4.80% 4.50% 4.20% 4.00% 3.80% What is the price today of a 4-year default-free security with a face value of $1,000 and an annual coupon rate of 6%? Show all your work. 2) The ABC company has a bond outstanding with a face value of $2,000 that reaches maturity in 10 years. The bond certificate indicates that the stated coupon rate for this bond is 5% and that the coupon payments are to be made semi-annually. How much are each of the semi-annual coupon payments? Assuming the appropriate YTM on the ABC company bond is 8.8%, then at what price should this bond trade?
1. A coupon bond pays annual interest, has a par value of P1,000, matures in 4 years, has a coupon rate of 10%, and has a yield to maturity of 12%. The current yield on this bond is 9.39% 10.65% 10.00% 12.00% 2. If Treasury bills yield 4.0%, and the market risk premium is 9.0%, then a portfolio with a beta of 1.5 would be expected to yield 19.5% 9.0% 15.0% 17.5% 3. What is the current price of a share of stock when last year’s dividend was P3.00, the growth rate is 6 percent, and the investor's required rate of return is 12 percent? P53.00 P25.00 P26.50 P50.00