A bond portfolio consists of three one-year bonds and two two-year bonds, each with 3% annual coupons. The market interest rate is 4%. Which of the following is the convexity of the portfolio? O 2.437 O 2.723 2.651 O 2.158
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- Bond Value as Maturity Approaches An investor has two bonds in his portfolio. Each bond matures in 4 years, has a face value of 1,000, and has a yield to maturity equal to 9.6%. One bond, Bond C, pays an annual coupon of 10%; the other bond, Bond Z, is a zero coupon bond. Assuming that the yield to maturity of each bond remains at 9.6% over the next 4 years, what will be the price of each of the bonds at the following time periods? Fill in the following table:Consider the following two-bond portfolio of option-free bonds;Bond A Bond B Years to maturity 5 years 10 years Coupon rate 5% 5% Par value 1000 1000 Yield to maturity 8% 6%Par amount owned R3,45 million R2 millionMarket value R30 367.59 (in 000’s) R18 528 (in 000’s)Assume that the duration of Bond A and B is 4.2 and 7.5 respectively; determine the duration of the portfolio.Consider the following three-bond portfolio in which all the bonds are option free: Bond Price Par Value Yield Market Value Duration 9% 5-year $122.4565 $5 million 4% $6,122,823 4.142 5% 20-year $113.6777 $2 million 4% $2,273,555 13.087 5.5% 30-year $126.0707 $2 million 4% $2,521,413 16.290 What is Bond 1’s (9% 5-year) contribution to portfolio duration? A. 3.23 B. 2.33 C. 4.33 D. 3.00
- Suppose the yield on a two-year-old Treasury bond is 5 percent and the yield on a one-year Treasury bond is a 4 percent. If the maturity risk premium (MRP) on these bonds is zero (0), what is the expected one-year interest rate during the second year (Year 2)?Consider the following three-bond portfolio in which all the bonds are option free: Bond Price Par Value Yield Market Value Duration 9% 5-year $122.4565 $5 million 4% $6,122,823 4.142 5% 20-year $113.6777 $2 million 4% $2,273,555 13.087 5.5% 30-year $126.0707 $2 million 4% $2,521,413 16.290 What is the portfolio duration? A. 7.81 B. 8.81 C. 6.80 D. 8.0You are creating a portfolio that consists of the following two bonds. Bond A pays an annual 7 percent coupon, matures in two years, has a yield to maturity of 8 percent, and a face value of $1,000. Bond B pays an annual 8 percent coupon, matures in three years, has a yield to maturity of 9 percent, and a face value of $1,000. Calculate the Modified Duration for Bond A.
- You are given the following information on two traded bonds making semi-annual coupon payments. Bond Face Value Coupon Maturity Price A $1,000 3% 12 years $850.10 B $1,000 10% 12 years $970.00 Calculate Yield to Maturity (YTM) for bonds A and B.Assume that a bond has a current price of $922.32, a coupon rate of 10 percent (pays $50every six months), and a yield-to-maturity of 11 percent. Based on this information, and assuming that rates remain constant, determine by how much the price of this bond will increase over the next 6 months. $1.38 $1.91 $2.63 $1.00 $0.73(a) Compute the market price (Vb) of the following bonds: (6)$1,000 par value, 10-yr maturity, and 8% coupon rate that is paid semi-annually? Assume the yield to maturity of 12%.$1,000 par value, 10-yr maturity, and 6% coupon rate that is paid semi-annually? Assume the yield to maturity of 12%.$1,000 par value, 10-yr maturity, and 8% coupon rate that is paid semi-annually? Assume the yield to maturity of 6%.(b) Based on your answers comment on the relationship (what happens to one variable when the other goes up/down) of (a) price with yield to maturity and (b) price with coupon rate. (4)
- Consider the following two-bond portfolio of option-free bonds; Bond A Bond B Years to maturity 5 years 10 years Coupon rate 5% 5% Par value 1000 1000 Yield to maturity 8% 6% Par amount owned R3,45 million R2 million Market value R30 367.59 (in 000’s) R18 528 (in 000’s) Required: a) Without doing any calculations, which bond would have a higher duration b) Assuming that Bond A is an option-free bond, calculate the bond’s modified duration using Macauly’s Duration. c) Assume that the duration of Bond A and B is 4.2 and 7.5 respectively; determine the duration of the portfolio. Requires: Macauly's Duration Modified Duration Weight Bond A Weight Bond B Portfolio DurationSuppose a 10-year, $ 1 comma 000 bond with an 8.1% coupon rate and semi - annual coupons is trading for a price of $1 comma 034.81. a. What is the bond's yield to maturity (expressed as an APR with semi - annual compounding)? b. If the bond's yield to maturity changes to 9.7% APR, what will the bond's price be?A bond has a time to maturity of 12 years, a coupon rate of 5% with interest paid quarterly, a current price of $850, and a yield to maturity of 12%. What is the price of the bond today? Group of answer choices 513.53 521.53 531.53 510.53
