10 5 points Problem 11-23 (Algo) Required: Find the convexity of a seven-year maturity, 6.2% coupon...
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10 5 points Problem 11-23 (Algo) Required: Find the convexity of a seven-year maturity, 6.2% coupon bond selling at a yield to maturity of 7.7%. The bond pays its coupons annually. (Do not round intermediate calculations. Round your answer to 4 decimal places.) Convexity eBook Print References 4 Problem 11-22 (Algo) 10 points eBook You manage a pension fund that will provide retired workers with lifetime annuities. You determine that the payouts of the fund are going to closely resemble level perpetuities of $1.6 million per year. The interest rate is 16%. You plan to fully fund the obligation using 5-year and 20-year maturity zero-coupon bonds. Required: a. How much market value of each of the zeros will be necessary to fund the plan if you desire an immunized position? (Do not round intermediate calculations. Enter your answers in millions. Round your answers to 1 decimal place.) Print Five-year Twenty-year References o Market Value million million b. What must be the face value of each of the two zeros to fund the plan? (Do not round intermediate calculations. Enter your answers in millions rounded to 2 decimal places.) Five-year Twenty-year Face Value million million 3 10 points Problem 11-15 (Algo) You will be paying $12,400 a year in tuition expenses at the end of the next two years. Bonds currently yield 8%. Required: a. What are the present value and duration of your obligation? (Do not round intermediate calculations. Round "Present value" to 2 decimal places and "Duration" to 4 decimal places.) eBook Print References Present value Duration years b. What is the duration of a zero-coupon bond that would immunize your obligation and its future redemption value? (Do not round intermediate calculations. Round "Duration" to 4 decimal places and "Future redemption value" to 2 decimal places.) Duration Future redemption value years c. Suppose you buy a zero-coupon bond with value and duration equal to your obligation. Now suppose that rates immediately increase to 9%. What happens to your net position, that is, to the difference between the value of the bond and that of your tuition obligation? (Enter your answer as a positive value. Do not round intermediate calculations. Round your answer to 2 decimal places.) Net position changes by 2 10 points Problem 11-9 (Algo) Required: An eight-year bond paying coupons annually has a yield of 12% and a duration of 7.198 years. If the bond's yield changes by 50 basis points, what is the percentage change in the bond's price? (Input the value as a positive value. Do not round intermediate calculations. Round your answer to 2 decimal places.) eBook The bond's price Print References %. 1 10 points Problem 11-4 (Algo) Required: A bond currently sells for $1,150, which gives it a yield to maturity of 5%. Suppose that if the yield increases by 10 basis points, the price of the bond falls to $1,130. What is the modified duration of this bond? (Do not round intermediate calculations. Round your answer to 4 decimal places.) Answer is complete but not entirely correct. Modified duration 18.2600 years 10 5 points Problem 11-23 (Algo) Required: Find the convexity of a seven-year maturity, 6.2% coupon bond selling at a yield to maturity of 7.7%. The bond pays its coupons annually. (Do not round intermediate calculations. Round your answer to 4 decimal places.) Convexity eBook Print References 4 Problem 11-22 (Algo) 10 points eBook You manage a pension fund that will provide retired workers with lifetime annuities. You determine that the payouts of the fund are going to closely resemble level perpetuities of $1.6 million per year. The interest rate is 16%. You plan to fully fund the obligation using 5-year and 20-year maturity zero-coupon bonds. Required: a. How much market value of each of the zeros will be necessary to fund the plan if you desire an immunized position? (Do not round intermediate calculations. Enter your answers in millions. Round your answers to 1 decimal place.) Print Five-year Twenty-year References o Market Value million million b. What must be the face value of each of the two zeros to fund the plan? (Do not round intermediate calculations. Enter your answers in millions rounded to 2 decimal places.) Five-year Twenty-year Face Value million million 3 10 points Problem 11-15 (Algo) You will be paying $12,400 a year in tuition expenses at the end of the next two years. Bonds currently yield 8%. Required: a. What are the present value and duration of your obligation? (Do not round intermediate calculations. Round "Present value" to 2 decimal places and "Duration" to 4 decimal places.) eBook Print References Present value Duration years b. What is the duration of a zero-coupon bond that would immunize your obligation and its future redemption value? (Do not round intermediate calculations. Round "Duration" to 4 decimal places and "Future redemption value" to 2 decimal places.) Duration Future redemption value years c. Suppose you buy a zero-coupon bond with value and duration equal to your obligation. Now suppose that rates immediately increase to 9%. What happens to your net position, that is, to the difference between the value of the bond and that of your tuition obligation? (Enter your answer as a positive value. Do not round intermediate calculations. Round your answer to 2 decimal places.) Net position changes by 2 10 points Problem 11-9 (Algo) Required: An eight-year bond paying coupons annually has a yield of 12% and a duration of 7.198 years. If the bond's yield changes by 50 basis points, what is the percentage change in the bond's price? (Input the value as a positive value. Do not round intermediate calculations. Round your answer to 2 decimal places.) eBook The bond's price Print References %. 1 10 points Problem 11-4 (Algo) Required: A bond currently sells for $1,150, which gives it a yield to maturity of 5%. Suppose that if the yield increases by 10 basis points, the price of the bond falls to $1,130. What is the modified duration of this bond? (Do not round intermediate calculations. Round your answer to 4 decimal places.) Answer is complete but not entirely correct. Modified duration 18.2600 years
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