When Reserve Bank actions cause interest rates on newly issued bonds to decrease from 6% to 5%, the prices of existing bonds Group of answer choices increase decrease only if the coupon rate is less than 5%. increase only if the coupon rate is greater than 6%. decrease may decrease or increase
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- The National Bank unexpectedly increases the base rate by 2% (200 basis points), which cause an immediate 75 basis point YTM increase of the mid- and long-term maturity bonds. What is the expectation how the equity market will behave and why? Please provide a long and detailed answer <3Bond J has a coupon rate of 3 percent and Bond K has a coupon rate of 9 percent. Both bonds have 13 years to maturity, make semiannual payments, and have a YTM of 6 percent. If interest rates suddenly rise by 2 percent, what is the percentage price change of these bonds? Percentage change in price of Bond J=? Percentage change in price of Bond K=? What if rates suddenly fall by 2 percent instead? Percentage change in price of Bond J=? Percentage change in price of Bond K=?Bond J has a coupon rate of 7 percent and Bond K has a coupon rate of 13 percent. Both bonds have 16 years to maturity, make semiannual payments, and have a YTM of 10 percent. a. If interest rates suddenly rise by 2 percent, what is the percentage price change of these bonds? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e. g., 32.16.) b. What if rates suddenly fall by 2 percent instead? (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.)
- Both Bond Bill and Bond Ted have 11.8 percent coupons, make semiannual payments, and are priced at par value. Bond Bill has 7 years to maturity, whereas Bond Ted has 24 years to maturity. Both bonds have a par value of 1,000. a. If interest rates suddenly rise by 2 percent, what is the percentage change in the price of these bonds? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) b. If rates were to suddenly fall by 2 percent instead, what would be the percentage change in the price of these bonds? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)Both Bond Bill and Bond Ted have 9.4 percent coupons, make semiannual payments, and are priced at par value. Bond Bill has 5 years to maturity, whereas Bond Ted has 22 years to maturity. Both bonds have a par value of 1,000. a. If interest rates suddenly rise by 2 percent, what is the percentage change in the price of these bonds? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) b. If rates were to suddenly fall by 2 percent instead, what would be the percentage change in the price of these bonds? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Bond Bill Bond ted a percentage in change b percentage in changeBond J has a coupon of 4 percent. Bond K has a coupon of 8 percent. Both bonds have 10 years to maturity and have a YTM of 7 percent. If interest rates suddenly rise by 2 percent, what is the percentage price change of these bonds? Note: A negative value should be indicated by a minus sign. Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places. If interest rates suddenly fall by 2 percent, what is the percentage price change of these bonds? Note: Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places.
- Refer to Table 10-1, which is based on bonds paying 10 percent interest for 20 years. Assume interest rates in the market (yield to maturity) decline from 16 percent to 6 percent. o. What is the bond price at 16 percent? Bond price |$ $. 64427 b. What is the bond price at 6 percent? c. What would be your percentage return on investment if you bought when rates were 16 percent and sold when rates were 6 percent? Note: Do not round intermediote colculotions. Input your onswer os o percent rounded to 2 decimel places. Return on irvestment $Assuming that the bond with the coupon you computed in b.4 were issued today, show to what the market price of that bond in b.4 would change if the bond yield to maturity fell by 2% shortly after it was issued at par value (with the change in the yield to maturity after issue occurring due to a decline in yields on 30-year T-bonds and/or a reduction in the company’s default risk) semi-annual payments and sells for its par value/principal amount of $1000 per bond? Market Rate = 4.97%-2%The Faulk Corp. has a 7 percent coupon bond outstanding. The Yoo Company has an 11 percent bond outstanding. Both bonds have 12 years to maturity, make semiannual payments, and have a YTM of 9 percent. If interest rates suddenly rise by 2 percent, what is the percentage change in the price of these bonds? What if interest rates suddenly fall by 2 percent instead? What does this problem tell you about the interest rate risk of lower coupon bonds
- a. What is the price (expressed as a percentage of the face value) of a 1-year, zero-coupon corporate bond with a AAA rating and a face value of $1,000? b. What is the credit spread on AAA-rated corporate bonds? c. What is the credit spread on B-rated corporate bonds? d. How does the credit spread change with the bond rating? Why? Note: Assume annual compounding.Bond J has a coupon rate of 5.8 percent. Bond K has a coupon rate of 15.8 percent. Both bonds have eleven years to maturity, a par value of $1,000, and a YTM of 12.6 percent, and both make semiannual payments. a. If interest rates suddenly rise by 2 percent, what is the percentage change in the price of these bonds? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) b. If interest rates suddenly fall by 2 percent instead, what is the percentage change in the price of these bonds? (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) Bill J Bill K a percentage change in price b percentage change in priceBond J has a coupon rate of 5.3 percent. Bond K has a coupon rate of 15.3 percent. Both bonds have eleven years to maturity, a par value of $1,000, and a YTM of 11.6 percent, and both make semiannual payments. a. If interest rates suddenly rise by 3 percent, what is the percentage change in the price of these bonds? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) b. If interest rates suddenly fall by 3 percent instead, what is the percentage change in the price of these bonds? (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.)
