r the folllowing cash flows. The market interest rate is 14%. What is the price of the bond? Year 0 1 2 3 4 CF 200 200 50 350 rate 14% DCF 175.44 153.89 33.75 2
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Consider the folllowing cash flows. The market interest rate is 14%. What is the price of the bond?
| Year | 0 | 1 | 2 | 3 | 4 |
| CF | 200 | 200 | 50 | 350 | |
| rate | 14% | ||||
| DCF | 175.44 | 153.89 | 33.75 | 207.23 |
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- On 31st March 2016 you saw the following information about bonds. Name of Security Face Value Maturity Date Coupon Rate Coupon Date(s) Zero Coupon 10,000 31st March 2026 N.A. N.A. t-Bill 1,00,000 24th June 2016 N.A. N.A. 10.71%GOTT 2026 100 31st March 2026 10.71 31st March 10%GOTT 2021 100 31st March 2021 10 31st March & 31st October 1B) What will be the annualized % yield of the treasury bill of face value which is currently traded at 98,000?A government bond with a par value of R1000, maturing in 5 years, offers an annual coupon of 9.5%, and a yield to maturity of 11.5%. PART A: What is the current value of the bond? Give your answer in Rands (R) correct to TWO decimal places.R........ PART B: Use the table approach to determine the value on the right-hand side of the convexity calculation. That is, what is the sum of the discounted cash flows, multiplied by (t2 + t)?Provide your answer correct to TWO decimal places. Answer.......... PART C: Given your results above, what is the convexity of this bond?Give your answer, correct to TWO decimal places. Answer....... PART D: If this bond has a modified duration of 4 and yields increase by 200 basis points, the correction for convexity ((∆P/P) will forecast that the bond price will decrease by what percentage?Provide your answer, in percent (%), correct to TWO decimal places. Answer% ..........You do not have to indicate the negative with `–` or `() `, simply provide your…Consider the following pure discount bonds with face value $1,000: Maturity Price 1 952.38 2 898.47 3 847.62 4 799.64 5 754.38 Suppose now that the current one-period interest rate is 5% and that the markets expects future one period interest rates to decline by %0.5 per year.(a). Assume first that the liquidity premium is constant at 1%. Draw a graph with the spot yield curve, the forward rates curve and a curve showing expected future one-period interest rates.(b). Assume next that the liquidity premium increases by 0.5% per year from initially being 1%. Draw a graph with the spot yield curve, the forward rates curve and a curve showing expected future one-period interest rates.
- Assume that the real risk-free rate, r*, is 3% and that inflation is expectedto be 8% in Year 1, 5% in Year 2, and 4% thereafter. Assume also that allTreasury securities are highly liquid and free of default risk. If 2-year and5-year Treasury notes both yield 10%, what is the difference in the maturityrisk premiums (MRPs) on the two notes; that is, what is MRP5minus MRP2?What is the coupon payment for the bond in the table? Assume semi-annual payments. Bond Coupon Rate Yield Price Years to maturity Apple B ? 4.9% $921.72 28Suppose the real risk-free rate is 2.80%, the average future inflation rate is 2.30%, a maturity premium of 0.25% per year to maturity applies, i.e., MRP = 0.25%(t), where t is the number of years to maturity. Suppose also that a liquidity premium of 0.50% and a default risk premium of 2.50% applies to A-rated corporate bonds. What is the difference in the yields on a 5-year A-rated corporate bond and on a 10-year Treasury bond? Here we assume that the pure expectations theory is NOT valid, and disregard any cross-product terms, i.e., if averaging is required, use the arithmetic average. a. 4.25 p.p. b. 2.25 p.p. c. 4.19 p.p. d. 3.00 p.p. e. 1.75 p.p. Please explain process and show calculations
- A recent listing for a Treasury bill gave an Asked Bank Discount Yield (d) of 1.30%. Its maturity was 80 days. a. What is the T-bill's coupon (bond) equivalent yield (y)?If Loras College’s bond is currently trading at a spread of 55.2 basis points to Treasuries and the yield on Treasury notes is 2.153%, the yield on the Loras College is closest to A. 2.2082%. B. 2.7050%. C. 3.1075%. D. 3.8750%.An investor in Treasury securities expects inflation to be 2.1%in Year 1, 2.7% in Year 2, and 3.65% each year thereafter. Assume that the real risk-free rateis 1.95% and that this rate will remain constant. Three-year Treasury securities yield 5.20%,while 5-year Treasury securities yield 6.00%. What is the difference in the maturity riskpremiums (MRPs) on the two securities; that is, what is MRP5 - MRP3?
