sider 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 du

sider 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 du

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter6: Fixed-income Securities: Characteristics And Valuation

Section: Chapter Questions

Problem 26P

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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 the portfolio duration? A. 7.81 B. 8.81 C. 6.80 D. 8.0
Consider the following two-bond portfolio of option-free bonds; Bond A Bond BYears to maturity 5 years 10 yearsCoupon rate 5% 5%Par value 1000 1000Yield to maturity 8% 6%Par amount owned R3,45 million R2 millionMarket value R30 367.59 (in 000’s) R18 528 (in 000’s) Required:a) Without doing any calculations, which bond would have a higher durationb) 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.
Assume that the financial anagement corporation'shas 1000 par value bond had a 5.70% coupon, matures on May 15,2020, has a current price quote of 97.708 and has yield to maturity (YTM) of 6.034%. Answer the following question:1. What was the dollar price of bond?2. What is the bond's current yield?3. Is the bond selling at par, at discount or at a premium?4. Compare the bond's current yield calculated in part B to its YTM and explain why its differ. using excel
An investor gathers the following data on three newly-issued bonds: 1-year government bond, 3.0% yield 1-year ABC corporate bond, 4.2% yield 10-year government bond, 3.8% yield If investors require a 0.5% liquidity premium for corporate bonds, what are the components of the required return on a 10-year ABC bond?
Assume you make the following investments: • A $10,000 investment in a 10-year T-bond that yields 7.50%, and • A $20,000 investment in a 10-year corporate bond with an AA rating and a yield of 8.70% Based on this information, and the knowledge that the difference in liquidity risk premiums between the two bonds is 0.60%, what is your estimate of the corporate bond’s default risk premium? 0.84% 1.20% 1.02% 0.60%
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)Without doing any calculations, which bond would have a higher duration
Review the Bond Table below; all bonds have semi - annual payments. Security CouponRate Face Value Price 1 - yr Treasury 0.00% $1.000 $ 965.905 - yr Treasury 4.50% $1.000 $ 991.18 10- yr Treasury 5.00% $1,000 $ 976.94 5-yr Corporate 4.80% $1,000 $912.46 (rated A) 10-year Corporate 8.40% $1,000 $1,044.66 (rated BBB) If a company wanted to issue a new Corporate Bond (10 years, A rating) for full price, what coupon rate would it have to offer?
Calculate the accrued interest (in $) and the total purchase price (in $) of the bond purchase. (Round your answers to the nearest cent.) Company CouponRate MarketPrice TimeSince LastInterest AccruedInterest Commissionper Bond BondsPurchased TotalPrice Company 1 8.25 102.50 78 days $ $3.50 15 $
Identify the types of bond being referred to in the following case: A P5,000,000-face value bond. It requires annual principal payment of P500,000 for ten years. It is secured with the issuing entity’s equipment.a. Straight; Fixed-rated; Junkb. Straight; Zero-coupon; Collateral Trustc. Serial; Fixed-rated; Junkd. Serial; Zero-coupon; Equipment Trust
Schallheim Corporation’s outstanding bonds have a $1,000 par value, a 14 percent semiannual coupon, 6 years to maturity, and an 11 percent yield to maturity (YTM). What is the bond’s price? a. $1,129.28 b. $1,126.92 c. $1,074.93 d. $740.31 e. $1,000.00
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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

	A.	3.23
	B.	2.33
	C.	4.33
	D.	3.00