An investor has just bought a semi-annual (181 days) bond with a face value of $5000,...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
An investor has just bought a semi-annual (181 days) bond with a face value of $5000, a coupon rate of 8%, maturing in 5 years, and the next coupon is to be received in 100 days. The market rate is 6% a. Price of the bond? I already calculated this part and the answer is $5426,5 b. 80 days after the purchase of the bonds, the market interest rate is 7%. Calculate the yield from investing in this bond if the bond is sold on this date? c. Assume that the investor wants to sell the bond immediately after receiving the 4th coupon. Calculate the yield d. To immune this bond portfolio from interest rate risk, which date should this bond be sold on? An investor has just bought a semi-annual (181 days) bond with a face value of $5000, a coupon rate of 8%, maturing in 5 years, and the next coupon is to be received in 100 days. The market rate is 6% a. Price of the bond? I already calculated this part and the answer is $5426,5 b. 80 days after the purchase of the bonds, the market interest rate is 7%. Calculate the yield from investing in this bond if the bond is sold on this date? c. Assume that the investor wants to sell the bond immediately after receiving the 4th coupon. Calculate the yield d. To immune this bond portfolio from interest rate risk, which date should this bond be sold on?
Expert Answer:
Related Book For
College Mathematics For Business Economics, Life Sciences, And Social Sciences
ISBN: 978-0134674148
14th Edition
Authors: Raymond Barnett, Michael Ziegler, Karl Byleen, Christopher Stocker
Posted Date:
Students also viewed these finance questions
-
An equipment trust bond with a face value of $10,000 has a bond coupon rate of 8% per year, payable quarterly. What are the amount and frequency of the dividend payments?
-
A recently issued industrial bond with a face value of $10,000 has a coupon rate of 8% per year, payable annually. The bond matures 20 years from now. Jeremy is interested in buying one bond. If he...
-
A one-year discount bond with a face value of $1,000 was purchased for $900. What is the yield to maturity? What is the yield on a discount basis?
-
Sarah is confused about the difference between the perimeter and the area of a polygon. Explain the two concepts and the distinction between them.
-
Determine the future worth for Problem 5. Should your company purchase the dump truck? In Problem 5, your company is looking at purchasing a dump truck at a cost of $65,000. The truck would have a...
-
On a scale of 1 to 10, wherein 1 stands for just one page summary information and 10 stands for detailed information on each and every accounting transaction: (a) As a retail investor, what level of...
-
Spensers Stores carried out the following transactions relating to a single product in October. Required (a) Prepare general journal entries to record the transactions, assuming that a perpetual...
-
Listed are the 2015 financial statements for Garners Platoon Mental Health Care, Inc. Spread the balance sheet and income statement. Calculate the financial ratios for the firm, including the...
-
The atomic number of element M, N, R, and T are 1, 8, 12 and 14 respectively. The element which can form ions by either losing or gaining electron(s) is M 11. A. B. N C R D. T 12. The atomic number...
-
Health Care Systems of Florida (HCSF) is planning to build a number of new emergency-care clinics in central Florida. HCSF management has divided a map of the area into seven regions. They want to...
-
(6) 6. Sketch the Bode diagram and the Nyquist plot for K (s-2) (s + 1) (s+ 10) G(s) = and determine the stability of the following system K G(s) when K goes from 0 to oo using the Nyquist stability...
-
What is real estate investment analysis? How does it differ from the concept of market value?
-
What is net operating income (NOI)? What are after-tax cash flows? Why do real estate investors prefer to use ATCFs?
-
What is leverage, and what role does it play in real estate investment? How does it affect the riskreturn values of a real estate investment?
-
A football is thrown on a long pass. Compared to the balls initial horizontal velocity component, the velocity at the highest point is (a) greater, (b) less, (c) the same.
-
Briefly describe each of the following approaches to real estate market value: a. Cost approach b. Comparative sales approach c. Income approach
-
On January 1, 2018, FAVB ( A C Corporation) was charged in total up front $1M for a software license (1 year term) and a maintenance contract ( 4 year term). They paid XYZ Corporation this payment....
-
Below is a sample of the data in the file NFLAttendance which contains the 32 teams in the National Football League, their conference affiliation, their division, and their average home attendance....
-
In Problem use the chain rule to find the derivative of each function. f(x) = e x 2
-
In Problem use the description of the region R to evaluate the indicated integral. ffe etty dA; R R = {(x, y)-x y x, 0x 2}
-
In Problem evaluate the expression. If the answer is not an integer, round to four decimal places. 8! 4!(8 4)!
-
What are five characteristics of good audience benefits?
-
Why might you choose a phone call, an email, a memo, a text message, or a particular social media for a given business message?
-
The Acme Corporation has been planning to acquire Best Products, and Acme employees are worried about how the acquisition will affect them. Ed Zeplin, Acmes human resource manager, has been visiting...
Study smarter with the SolutionInn App