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- Homework MBC LO6 M7-23. to the $400,000 maturity Applying Time Value of Money Concepts Complete the missing information in the table below. Assume that all bonds pay interest semiannually. Firm 1... Firm 2... Firm 3... Firm 4... Firm 5... Annual Yield Years to Maturity Coupon Rate 8.00% 15 3.00% 6.50% 0.80% 10 ? 12 20 Concents 7.00% 0.00% 5.00% 3.50% 2.00% Face Value $ 300,000 ? $ 500,000 $1,000,000 $ 500,000 Issue Proceeds ? $ 556,853 $ 468,416 $1,147,822 ? honds Ozona MineralA2 9c with info from b. May I please have it in formula version and not excel. thx:) Answer the following questions on bond valuation and duration. 9. Answer the following questions on bond valuation and duration. part b info: Face value of $1000 Five years to maturity Coupon rate of 11%, paid semi-annually Current price of $970 (Hint: The effective annual yield should be 12.1604%.) part b information Macaulay Duration=[(t1 X FV)(C)/(m X PV)(1+Y)T]+...+[(tn X FV)(C)/(mXPV)(1+YTM/m)mtn X (tnXFV)/(PV) (1+YTM/m)mtn.Macaulay Duration=[(t1 X FV)(C)/(m X PV)(1+Y)T]+...+[(tn X FV)(C)/(mXPV)(1+YTM/m)mtn X (tnXFV)/(PV) (1+YTM/m)mtn. T = Total time = 5; C = Coupon payment = 1,000 X (0.11/2) = $55; Y = Yield = 12.1604%/2 = 0.0607; N = No. of periods = 2; M = Maturity = 5 years; and Bond Price = $970. Macaulay Duration = [(0.5 X $1,000) ($55)/(5 X $670)(1+0.0607)2X0.5]+ [(1 X $1,000)…INV3 P2a Independent Case A Your observations of the bond market have highlighted the following bond prices, as shown in the table below. All the bonds have $1000 face value, pay coupons annually and all have the same calendar day of maturity (which was yesterday) with differing numbers of years remaining. Description Current price ($) 1-year 2% coupon 975 2-year 4% coupon 1000 3-year 6% coupon 1100 Estimate the term structure for the next three years (i.e., spot rate for the first year, and the forward rates for the second and third years), assuming the pure expectations hypothesis (PEH) holds.
- Q3) Referring to the two corporate bonds' data at below table, answer the following: If the market interest rate was 10%, what would the bonds prices be? Would you consider both bonds to be selling at a discount, premium, or at par value and why? Explain what it means when a bond is selling at a discount, a premium, or at its par value. Bond A Bond B Maturity Years 20 30 Coupon Rate (Paid Semiannual) 12% 8% Par Value (OMR) 1000 1000H5. f. (1) What is the yield to maturity on a 10-year, 9% annual coupon, $1,000 par value bond that sells for $887.00? That sells for $1,134.20? What does the fact that a bond sells at a discount or at a premium tell you about the relationship between rd and the bond’s coupon rate? solve in Excel Show proper step by step calculation and explain with detailsINV3 P1a Bond # 1 2 3 4 1 - year strip bond 2- year strip bond 2-year 6% coupon bond 2-year 7% coupon bond Purchase Price for the bond) 950 ? ? ? Year 1 cash flow 1000 0 60 70 Year 2 cash flow 0 1000 1060 1070 Yield to Maturity ? ? 5.50% ? Fill in the missing pieces from the following table using the Law of One Price. Assume all these bonds have the same risk, the yield curve is flat, and any coupon payments are paid annually.
- 1. Bond problem 1. Solve for the missing parameters "?" using Excel; show spreadsheet work: a) Number of Periods: ? Rate of Return: 18% Coupon Rate: 12% Market Price: $13,767.90 Face Value: $50,000.00 b) Coupon Rate: ? Periods: 5 Payment: $1000 Market Price: $15,000 Face Value: $10,000 c) Face Value: ? Rate of Return: 20% Periods: 5 Coupon Rate: 6.5% Market Price: $1,000Firm A has 5.25% semiannual coupon bonds. Market price = $546.19. The yield to maturity = 16.28 percent. It takes how many years for it to mature? A) 6.64 B) 7.08 C) 12.41 D) 14.16 E) 28.32INV3 P1b Bond # 1 2 3 4 1 - year strip bond 2- year strip bond 2-year 6% coupon bond 2-year 7% coupon bond Purchase Price for the bond) 950 ? ? ? Year 1 cash flow 1000 0 60 70 Year 2 cash flow 0 1000 1060 1070 Yield to Maturity ? ? 5.50% ? If the expectations theory of the yield curve is correct, what is the market expectation of the price that bond #3 will sell for next year?
- INV3 P1c Bond # 1 2 3 4 1 - year strip bond 2- year strip bond 2-year 6% coupon bond 2-year 7% coupon bond Purchase Price for the bond) 950 ? ? ? Year 1 cash flow 1000 0 60 70 Year 2 cash flow 0 1000 1060 1070 Yield to Maturity ? ? 5.50% ? If the liquidity preference theory is correct and you believe that the liquidity premium is 1 percent, what is the market expectation of the price that bond #4 will sell for next year?INV3 1c If the liquidity preference theory is correct and you believe that the liquidity premium is 1 percent, what is the market expectation of the price that bond #4 will sell for next year? Bond # 1 2 3 4 1 - year strip bond 2- year strip bond 2-year 6% coupon bond 2-year 7% coupon bond Purchase Price for the bond) 950 907.03 1,009.23 1,027.69 Year 1 cash flow 1000 0 60 70 Year 2 cash flow 0 1000 1060 1070 Yield to Maturity 5% 5% 5.50% 5.50%7.11 A term structure is defined by the following accumulation function: a(t)=e0.03t, for 0 <t≤ 5,e0.06+0.0025(1+t)2, for t>5. If a 10-year bond makes level coupon payments at year 2, 4, 6, 8 and 10.Find the par yield of this bond.