Assume that a 6-month forward contract on a zero-coupon bond with market face value of Php12,000 and is currently priced at Php8,000. With an annual risk-free interest rate of 5.0625%, the forward contract price under the no-arbitrage principle is Php8,000. Php7,794.87. Php7,500. Php8,200.
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- Suppose a 10-year, 10% semiannual coupon bond with a par value of 1,000 is currently selling for 1,135.90, producing a nominal yield to maturity of 8%. However, the bond can be called after 5 years for a price of 1,050. (1) What is the bonds nominal yield to call (YTC)? (2) If you bought this bond, do you think you would be more likely to earn the YTM or the YTC? Why?Assume that a 6-month forward contract on a zero-coupon bond with market face value of Php12,000 and is currently priced at Php8,000. With an annual risk-free interest rate of 5.0625%, the forward contract price under the no-arbitrage principle is a. Php8,000. b. Php7,794.87. c. Php7,500. d. Php8,200. Let's pretend the forward contract is truly worth Php8,300 instead of the no-arbitrage price determined above. This bond must be delivered 6 months from now due to a short position in the forward contract. In this case, the arbitrage entails borrowing Php8,000 at the risk-free rate of 5.0625%, purchasing the bond for Php8,000, and simultaneously taking a short position in the forward contract on the zero-coupon bond, obligated to deliver the bond for the forward price and receive Php8,300 at the contract's expiration. We can fulfill our forward contract obligations at the settlement date by delivering the zero-coupon bond for payment of Php8,300, regardless of its…Assume that a 5-month forward contract on a zero-coupon bond with marketface value of Php5,000 and is currently trading at Php4,777. Suppose thatthe annual risk-free interest rate is 6.28%. Determine the forward contract price under the no-arbitrage principle.
- Assume that a 5-month forward contract on a zero-coupon bond with marketface value of Php5,000 and is currently trading at Php4,777. Suppose thatthe annual risk-free interest rate is 6.28%, How much is the arbitrage profit?Consider a 3-month forward contract on a zero-coupon bond with a face value of $1,000 that is currently quoted at $500, and assume a risk-free annual interest rate of 6%. Determine the price of the forward contract under the no-arbitrage principle.Suppose that forward contract is valued at Php5,100 instead of the no-arbitrage price. This bond must be delivered 5months from now due to a short position in the forward contract. In thiscase, the arbitrage entails borrowing Php4,777 at the risk-free rate of6.28%, purchasing the bond for Php4,777, and simultaneously taking ashort position in the forward contract on the zero-coupon bond, obligatedto deliver the bond for the forward price and receive Php5,100 at thecontract's expiration. We can fulfill our forward contract obligations at thesettlement date by delivering the zero-coupon bond for payment ofPhp5,100, regardless of its market value at the moment. The Php5,100cash from the forward contract settlement would be used to repay thePhp4,777 loan. What is the total amount of repaying the loan over 5months?
- Suppose that a bond has a face value of Php300,000 and its maturity date is 20 years from now. The coupon rate is 2% payable semi-annually. Find the market value of this bond, assuming that the annual market rate is 6%. a. Php153,378.20 b. Php163,378.20 c. Php273,678.20 d. Php303,375.20You can enter into a forward contract for a bond with a maturity in one year months that pays a coupon payment of $25 every six months. The bond has a forward price of $930. The current zero coupon rate for 6 months is 4% annually and the zero coupon risk free rate for one year is 5% annually (assume continuous compounding). The current price of the bond is $943. Use the equilibrium forward price equation (F=Sert) adjusted for both coupon payments to see if an arbitrage opportunity exists. If arbitrage is possible, explain the arbitrage opportunity that exists and show how the profit can be earned – make sure to explain every step in detail in realizing the profit and establishing the arbitrage. If arbitrage is not possible, show how you know it is not possible. ANSWER IN TYPING OTHER WISE DOWNVOTE YOUA six-month zero-coupon bond is trading at 97 [P0] while a one-year 8 [c]% coupon bond is trading at 100 [P1]. Assume coupons are paid semiannually and that both bonds have a face value of $100. What is the semiannually-compounded forward rate f(0.5, 1) IN PERCENT p.a. implied by these prices? (Solution should be: 9.904)
- Suppose a 10 -year,$1,000bond with a(n)9%coupon rate and semiannual coupons is trading for a price of$946.34. a. What is the bond's yield to maturity (expressed as an APR with semiannual compounding)? b. If the bond's yield to maturity changes to9%APR, what will the bond's price be?A one year gold futures contract is selling for $1,754. Spot gold prices are $1,600 and the one-year risk free rate is 3.4%. The arbitrage profit per contract implied by these prices is____________Assuming semiannual compundingwith 15 years to maturity paying 1,000.00 at maturity for YTM of 7%, 11%, and 15% what is the price of a zero coupon bond for each YTM? Financial Calculator for 7%: n = 30, I/Y = 7%, CPT PV, PMT = 0, FV = 1000. Price = $131.37. Financial Calculator for 11%: n = 30, I/Y = 11%, CPT PV, PMT = 0, FV = 1000. Price = $43.68. Financial Calculator for 15%: n = 30, I/Y = 15%, CPT PV, PMT = 0, FV = 1000. Price = $15.10.
