What makes duration of a bond different from its term to maturity? Answer must be limited to one sentence. If bond P has a 12 percent coupon and term-to-maturity 8 years while bond Q has a 17 percent coupon and term-to-maturity 11 years, which bond has shorter duration and why?
Q: A bond with a 9-year duration is worth $1,080, and its yield to maturity is 8%. If the yield to…
A: Given: PV = 1080 duration = 9 YTM = 8%
Q: Assuming semiannual compounding, what is the price of a zero coupon bond with 11 years to maturity…
A: Using PV function excel
Q: A bond with a 7.3 yield has a modified duration of 5.4 and is trading at 985. If the yield decreases…
A: Given information: Duration (D)=5.4Yield (y)=7.3%Change in yield (△y)=-2%Price(P)=985
Q: What is the Maturity risk premium of a bond that matures in 8 years? answer in % without the symbol
A: Maturity Risk Premium: It represents the extra return demanded by an investor for bearing the risk…
Q: What is the yield-to-maturity of an Acme bond selling for $1,107.50 with 5 years to maturity, a 12…
A: Yield to maturity is the percentage rate which shows the percentage return earned by the investor if…
Q: Which one of the following bonds has the lowest interest rate risk? A. 8-year, zero coupon B.…
A: Interest rate risk refers to the loss which is caused from an adverse interest rate movements. An…
Q: . Suppose a bond has duration of 6 years, and a current yield to maturity of 10%. If the yield to…
A: Calculation of percentage change in the price of the bond: Answer: The percentage change in the…
Q: Rank the durations or effective durations of the following pairs of bonds:a. Bond A is a 6% coupon…
A: a) Bond A has a coupon rate of 6% , with time to maturity of 20 years and is selling at par.…
Q: Two bonds are selling at par value and each has 17 years to maturity. The first bond has a coupon…
A: Duration refers to the price sensitivity of a bond, or a portfolio of bonds, to a change in interest…
Q: b. What is the probability that neither
A: Given: P( default on a seven-year AA-rated bond ) = 0.06P( seven-year AA-rated bond ) = 0.13P(…
Q: a. In the above table, find the Treasury bond that matures in May 2044. What is the asked price of…
A: Par Value of Bond = $1,000 Current time period = May 2019 Maturity date = May 2044 Rate at 2044 =…
Q: Assuming semiannual compounding, what is the price of a zero coupon bond with 11 years to maturity…
A: price of the bond formula: price of bond=par1+ytmmm×nwhere,ytm =yieldn=years to maturitym=frequency…
Q: A zero-coupon bond with 20 years remaining to maturity has a duration of ____________ years, and a…
A: Solution:- Duration is the immunization period, where price effect becomes equal to reinvestment…
Q: Which $1000 bond has the higher yield to maturity: a 20-year bond selling for $800 with a current…
A: In simple words, yield to maturity on the bond refers to the internal rate of return that an…
Q: A zero-coupon bond refers to a bond which: a. Does not pay any coupon payments because the issuer is…
A: A bond is a portal through which a corporate or governmental body raises capital. When bonds are…
Q: Both bonds have the same stated rate of 12%. Which bond has the greatest interest rate risk?
A: Duration measures the sensitivity of price of the bond to changes in interest rates. The interest…
Q: A Rio Tinto corporate bond currently sells for $1,450, which gives it a yield to maturity of 7%. Its…
A: The duration of a bond is a measure of the change in bond prices with the change in the interest…
Q: 4) Bonds A and B are selling at par value, and each has 10 years to maturity. Bond A has a coupon…
A: Bond A and B both are trading at par. It means their coupon rate is currently their Yield to…
Q: 2) Which one of the following par-value 14% coupon bonds experiences a price change of $43 when the…
A: Bonds are the debt security which is offered or issued by the corporations or the government to…
Q: A zero coupon bond that has a term to maturity of 8 years currently sells for $14.50. What is the…
A: The duration of this zero-coupon bond is 8 years.
Q: what are the main characteristics of a bond? Provide examples of different types of bonds in terms…
A: “Since you have asked multiple questions, we will solve the first question for you. If you want any…
Q: Which of the following statements is correct? Group of answer choices The actual capital gains yield…
A: The bonds carry the annual coupon payment and there are face value of bond that is paid on the…
Q: If the coupon rate on a bond is 8 percent and current market interest ratesare 6 percent, should…
A: Given that, coupon rate on a bond is 8 percent and current market interest rates are 6 percent.
Q: Zero-coupon bond. Wesley Company will issue a zero-coupon bond this coming month. The projected bond…
A: zero coupon bonds are the bonds which do not provide coupon during its life. formula: price of…
Q: Consider two bonds, Bond C and Bond D, both with a yield to maturity of 10 percent and with 5 years…
A: Bonds can be defined as the debt instrument that represents a loan made by an investor to a…
Q: All other things equal(YTM = 10%), which of the following has the shortest duration?
A: Bonds are the financial instruments that are issued by the company to the investors to raise…
Q: Which of the following four bonds has the least Macaulay duration? A bond with A. 4.75%…
A: Macaulay duration is the weighted average of the time it takes to get cash flows from a bond and it…
Q: You have estimated that the Duration of a particular bond is 18,If the yield to maturity on this…
A: Modified duratiom is also known as Volitality of Bond. Volitality indicates change in bond's price…
Q: A bond has a MacD of 14.6, ModD of 13.8 and DV01 of $2.5. Suppose its yield to maturity goes up one…
A: D. The bond's price should increase by approximately 13.8%.
Q: What is the market value of a bond that will pay a total of fifty semiannual coupons of $80 each…
A: Face value of bond (FV) = $1000 Semi annual coupon amount (C) = $80 Number of semi annual coupon…
Q: A bond's modified duration is 7.5 years, its current yield-to-maturity is 6%, and its price is $950.…
A: A financial instrument that doesn’t affect the ownership of the common shareholders or management of…
Q: A new bond is just issued. The market price of this bond is $1,000. Then, the coupon rate of this…
A: Given data; Market price of bond = $1000 Face value of bond = $1000
Q: A semiannual corporate bond has a face value of $1,000, a price of $785.24, a coupon rate of 9.5%…
A: A bond refers to the instrument which obligates the issuer to pay pre-defined interest to the buyer.…
Q: For an investor who plans to purchase a bond that matures in one year, the primary concern should be…
A: Bonds are source of investment, where the investor gets the fixed coupon payment through out the…
Q: What is the price of each bond today? (Do not round intermediate calculations. Round your answers to…
A: INTRODUCTION Bond price is the amount for which bond is selling in the market. At this price, a…
Q: Find the duration of a 6% coupon bond making annual coupon payments if it has three years until…
A: The duration of the bond is calculated to measure how the price of the bond changes when the…
Q: Bond X is a premium bond making semiannual payments. The bond pays a coupon rate of 7 percent, has a…
A: Price of a bond can be caluclated as the sum of present value of all the coupon payments made and…
Q: Which of the following statements is most correct? a. If a bond’s yield to maturity exceeds its…
A: Given statement: A} If a bond’s yield to maturity exceeds its annual coupon, then the bond will be…
Q: a one year holding period bond with no coupon payments, the interest rate is the same as the YTM…
A: Step 1 The level of coupon is an annual yield on a stake that an investor can expect to earn if he…
Q: A fixed-income analyst, Sean, observes a 7-year, 8% semiannual-pay bond. the face amount is ¥1,000.…
A: A Bond is an instrument that represents the loan that is made by the investor to the company and…
Q: Suppose a bond with a 14% coupon rate and semiannual coupons with 12% YTM and has a face value of…
A: A bond with a price less than its face value is called a discount bond and a bond with its price…
Q: Bond A and Bond B are zero coupon bonds. Bond A has a maturity of 10 years and Bond B has a maturity…
A: Zero Coupon bond: Zero coupon bonds are the bonds which usually issue at discount and doesnot pay…
Q: If the market rate of interest is 15 percent and the bond interest rate is 10%, the bonds will sell…
A: As posted multiple independent questions we are answering only first three questions kindly repost…
Q: Bond A has a duration of 14.2 and Bond B has a duration of 13.9 years. Therefore, relative to Bond…
A: Solution:- Duration measures the sensitivity of bond price with respect to change in interest rate.
Q: A zero-coupon bond refers to a bond which: Answer a. Does not pay any coupon payments because the…
A: A zero-coupon bond is also known as an accrual bond.
What makes duration of a bond different from its term to maturity? Answer must be limited to one sentence. If bond P has a 12 percent coupon and term-to-maturity 8 years while bond Q has a 17 percent coupon and term-to-maturity 11 years, which bond has shorter duration and why?
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- Which bond is more sensitive to an interest rate change of 1 percent? Bond A: Yield to maturity = 4.00%, maturity = 8 years, coupon = 6% or £60, face value = £1,000. OR Bond B: Yield to maturity = 3.50%, maturity = 5 years, coupon = 7% or £70, face value = £1,000. A. Bond A B. Bond B C. Cannot be determined D. Both are equally sensitive.You have estimated that the Duration of a particular bond is 18,If the yield to maturity on this bond is 10,1, what is the bond's Modified Duration ?Which of the following statements is CORRECT? a. The shorter the time to maturity, the greater the change in the value of a bond in response to a given change in interest rates, other things held constant. b. You hold two bonds. One is a 10-year, zero coupon, bond and the other is a 10-year bond that pays a 6% annual coupon. The same market rate, 6%, applies to both bonds. If the market rate rises from the current level, the zero coupon bond will experience the smaller percentage decline. c. You hold two bonds, a 10-year, zero coupon, issue and a 10-year bond that pays a 6% annual coupon. The same market rate, 6%, applies to both bonds. If the market rate rises from its current level, the zero coupon bond will experience the larger percentage decline. d. The longer the time to maturity, the smaller the change in the value of a bond in response to a given change in interest rates. e. The time to maturity does not affect…
- (a) Do you agree with the following statement, and explain why? “If two bonds have the same duration, then the percentage change in price of the two bonds will be the same for a given change in interest rates.” (b) Discuss the problems with the traditional bond pricing approach by using the yield to maturity. (300 words)a.) what are the main characteristics of a bond? Provide examples of different types of bonds in terms of coupons and maturity. b.) explain the difference between "coupon rate" and "yield to maturity ". Show using examples, how changes in the coupon rate and yield to maturity affects the bond price. c.) You are asked to put a value on a bond which promises eight annual coupon of £50 and will repay its face value of £1000 at the end of eight years. You observe that other similar bonds have yields to maturity of 9per cent. i.) How much is this bond worth? ii.) You are offered the bond for a price of £755.5. What yield to maturity does this represent? d.) You believe that next year XYZ plc will pay a dividend of £2 on its common stock. There after you expect dividend to grow at a rate of 4% a year in perpetuity. If you require a return of 12% on your investment. i.) How much should you be prepared to pay for the stock? ii.) Assuming that the expected stock price at the end of…Which of the following statements correctly describes the sensitivity of a bond’s price to a change in market yields? Group of answer choices A. The price of a zero-coupon bond with four years until expiry is going to be more sensitive to changes in market yields than the price of a coupon paying bond issued by the same company with the same term to expiry. B. Holding all other factors constant, the longer the term to expiry, the less sensitive a bond’s price is to changing market yields. C. Holding all other factors constant, the higher the coupon rate, the more sensitive is a bond’s price to changing market yields. D. More than one of the other statements are correct.
- Consider an A-rated bond and a B-rated bond. Assume that the one-year probabilities of default for the A- and B-rated bonds are 1% and 3%, respectively, and that default correlation between the two bonds is 20%. What is the joint probability of default of the two bonds?Rank the durations or effective durations of the following pairs of bonds:a. Bond A is a 6% coupon bond, with a 20-year time to maturity selling at par value. Bond B is a 6% coupon bond, with a 20-year time to maturity selling below par value.b. Bond A is a 20-year noncallable coupon bond with a coupon rate of 6%, selling at par. Bond B is a 20-year callable bond with a coupon rate of 7%, also selling at par.Which of the following four bonds has the least Macaulay duration? A bond with A. 4.75% yield and 40-year maturity. B. 5.25% yield and 30-year maturity. C. 6.75% yield and 20-year maturity. D. 7.25% yield and 10-year maturity.
- If the market rate of interest is 15 percent and the bond interest rate is 10%, the bonds will sell at a _______________. If a bonds interest rate is 10 % and the market rate is 8 %, the bonds will sell at a ______________. In computing the carrying amount of a bond, unamortized _____________ is subtracted from the face value of the bond. In computing the carrying amount of a bond, unamortized _______ is added to the face value of the bond. If a bond sells at a _____________, an amount more than the face value of the bond is received on the date of issuance. If a bond sells at a ____________, an amount less than the face value of the bond is received on the date of issuance.A General Power bond carries a coupon rate of 10.0%, has 9 years until maturity, and sells at a yield to maturity of 9.0%. (Assume annual interest payments.) a. What interest payments do bondholders receive each year? b. At what price does the bond sell? (Do not round intermediate calculations. Round your answer to 2 decimal places.) c. What will happen to the bond price if the yield to maturity falls to 8.0%? (Do not round intermediate calculations. Round your answer to 2 decimal places.) d. If the yield to maturity falls to 8.0%, will the current yield be less, or more, than the yield to maturity?You have estimated that the Duration of a particular bond is 20. If the yield to maturity on this bond is 6.5, what is the bond's Modified Duration? Provide your answer correct to TWO decimal places