You observe the following bonds Face Value Bond 1 1000 Coupon 8% Rate Yield 6% Maturity...
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You observe the following bonds Face Value Bond 1 1000 Coupon 8% Rate Yield 6% Maturity 15 Bond Bond 2 3 1000 1000 8% 6% 10 8% 6% 5 Bond 4 1000 5% 6% 15 Bond Bond Bond Bond 5 6 7 8 1000 1000 1000 1000 5% 6% 10 5% 6% 5 0% 6% 15 0% 6% 10 Bond 9 1000 0% 6% 5 a. Given the above characteristics compute the price of each bond. Assume that coupns are paid once annually. b. Represent, on a graph, the price-yield relationship for each bond for values of the yield varying from 0.5% to 12.00%. What do you observe? In other words, discuss the effect of the coupon rate and the maturity on the price-yield relationship. Do you observe anything else? You observe the following bonds Face Value Bond 1 1000 Coupon 8% Rate Yield 6% Maturity 15 Bond Bond 2 3 1000 1000 8% 6% 10 8% 6% 5 Bond 4 1000 5% 6% 15 Bond Bond Bond Bond 5 6 7 8 1000 1000 1000 1000 5% 6% 10 5% 6% 5 0% 6% 15 0% 6% 10 Bond 9 1000 0% 6% 5 a. Given the above characteristics compute the price of each bond. Assume that coupns are paid once annually. b. Represent, on a graph, the price-yield relationship for each bond for values of the yield varying from 0.5% to 12.00%. What do you observe? In other words, discuss the effect of the coupon rate and the maturity on the price-yield relationship. Do you observe anything else?
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Related Book For
Macroeconomics Principles Applications and Tools
ISBN: 978-0134420684
9th edition
Authors: Arthur O'Sullivan, Steven Sheffrin, Stephen Perez
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