1) Bond X is a premium bond making semiannual payments. The bond pays a 10 perce
ID: 2704686 • Letter: 1
Question
1)
Bond X is a premium bond making semiannual payments. The bond pays a 10 percent coupon, has a YTM of 8 percent, and has 16 years to maturity. Bond Y is a discount bond making semiannual payments. This bond pays a 8 percent coupon, has a YTM of 10 percent, and also has 16 years to maturity.
What is the price of each bond today? (Round your answers to 2 decimal places. (e.g., 32.16))
If interest rates remain unchanged, what do you expect the price of these bonds to be one year from now? In seven years? In twelve years? In 14 years? In 16 years? (Round your answers to 2 decimal places. (e.g., 32.16))
Both Bond Sam and Bond Dave have 6 percent coupons, make semiannual payments, and are priced at par value. Bond Sam has three years to maturity, whereas Bond Dave has 20 years to maturity.
If interest rates suddenly rise by 2 percent, what is the percentage change in the price of Bond Sam and Bond Dave? (Negative amounts should be indicated by a minus sign. Round your answers to 2 decimal places. (e.g., 32.16))
If rates were to suddenly fall by 2 percent instead, what would be the percentage change in the price of Bond Sam and Bond Dave? (Round your answers to 2 decimal places. (e.g., 32.16))
Bond X is a premium bond making semiannual payments. The bond pays a 10 percent coupon, has a YTM of 8 percent, and has 16 years to maturity. Bond Y is a discount bond making semiannual payments. This bond pays a 8 percent coupon, has a YTM of 10 percent, and also has 16 years to maturity.
Explanation / Answer
1) Bond X is a premium bond making semiannual payments. The bond pays a 10 percent coupon, has a YTM of 8 percent, and has 16 years to maturity. Bond Y is a discount bond making semiannual payments. This bond pays a 8 percent coupon, has a YTM of 10 percent, and also has 16 years to maturity. What is the price of each bond today? (Round your answers to 2 decimal places. (e.g., 32.16)) Price of bond X $1,177.03 Price of bond Y $843.53 If interest rates remain unchanged, what do you expect the price of these bonds to be one year from now? In seven years? In twelve years? In 14 years? In 16 years? (Round your answers to 2 decimal places. (e.g., 32.16)) Price of bond Bond X Bond Y One year $1,171.19 $847.88 Seven years $1,124.94 $884.82 Twelve years $1,066.24 $936.60 14 years $1,035.67 $965.29 16 years $1,000.00 $1,000.00 2) Both Bond Sam and Bond Dave have 6 percent coupons, make semiannual payments, and are priced at par value. Bond Sam has three years to maturity, whereas Bond Dave has 20 years to maturity. If interest rates suddenly rise by 2 percent, what is the percentage change in the price of Bond Sam and Bond Dave? (Negative amounts should be indicated by a minus sign. Round your answers to 2 decimal places. (e.g., 32.16)) Percentage change in price of Bond Sam -5.24% Percentage change in price of Bond Dave -19.79% If rates were to suddenly fall by 2 percent instead, what would be the percentage change in the price of Bond Sam and Bond Dave? (Round your answers to 2 decimal places. (e.g., 32.16)) Percentage change in price of Bond Sam 5.60% Percentage change in price of Bond Dave 27.36%
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