(a) (b) (C) Each of the bonds in the following table has a $1,000 par value...
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(a) (b) (C) Each of the bonds in the following table has a $1,000 par value and pays annual coupons. Calculate the missing values. (5 marks) Bond X Y Coupon interest rate (% p.a.) 8 3 Years to maturity 7 7 Yield to maturity (% p.a.) 5 ? Bond price ($) ? 970 Which risk will not differ between Bonds X and Y in part (a): default risk or maturity risk? Why? (2.5 marks) Explain what will happen to the yield to maturity and price of Bonds X and Y in part (a) if inflation is expected to increase. (No calculations required.) (2.5 marks) (a) (b) (C) Each of the bonds in the following table has a $1,000 par value and pays annual coupons. Calculate the missing values. (5 marks) Bond X Y Coupon interest rate (% p.a.) 8 3 Years to maturity 7 7 Yield to maturity (% p.a.) 5 ? Bond price ($) ? 970 Which risk will not differ between Bonds X and Y in part (a): default risk or maturity risk? Why? (2.5 marks) Explain what will happen to the yield to maturity and price of Bonds X and Y in part (a) if inflation is expected to increase. (No calculations required.) (2.5 marks) (a) (b) (C) Each of the bonds in the following table has a $1,000 par value and pays annual coupons. Calculate the missing values. (5 marks) Bond X Y Coupon interest rate (% p.a.) 8 3 Years to maturity 7 7 Yield to maturity (% p.a.) 5 ? Bond price ($) ? 970 Which risk will not differ between Bonds X and Y in part (a): default risk or maturity risk? Why? (2.5 marks) Explain what will happen to the yield to maturity and price of Bonds X and Y in part (a) if inflation is expected to increase. (No calculations required.) (2.5 marks)
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Lets solve each part of the question a Calculate the missing values For Bond X Given Coupon interest rate 8 pa Years to maturity 3 years Yield to matu... View the full answer
Related Book For
Principles Of Managerial Finance
ISBN: 978-0136119463
13th Edition
Authors: Lawrence J. Gitman, Chad J. Zutter
Posted Date:
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