An investor purchases a nine-year, 7% annual coupon payment bond at a price equal to par...
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An investor purchases a nine-year, 7% annual coupon payment bond at a price equal to par value. After the bond is purchased and before the first coupon is received, interest rates increase to 8%. The investor sells the bond after five years. Assume that interest rates remain unchanged at 8% over the five-year holding period. d. Per 100 of par value, calculate the future value of the reinvested coupon payments at the end of the holding period. e. Calculate the capital gain/loss per 100 of par value resulting from the sale of the bond at the end of the five-year holding period. f. Assuming that all coupons are reinvested over the holding period, calculate the investor's five-year horizon yield. g. An investor buys a 6% annual payment bond with three years to maturity. The bond has a yield-to-maturity of 8% and is currently priced at 94.845806 per 100 of par. What is the bond's Macaulay duration? h. Recommend a corporate bond issued by a company in your country and provide basic information of this bond (such as issuer, parent company, coupon rate, coupon type, coupon frequency, redemption date, issue date, issue price, currency, minimum initial investment, etc.). ●Calculate the YTM of this bound by assuming the interest rate is the risk-free rate in your country. ●Analyze the interest risk of holding this bond. ●Analyze the credit risk of this bond using the knowledge we learned in the class, such as Four Cs (Capacity, Collateral, Covenants, and Character), sovereign risk and bond rating Maturity 3 years 3 years 3 years Bond Coupon Rate X 8% Y 7% Z 6% All three bonds pay interest annually. a. Based on the given sequence of spot rates, what is the price of Bond X? Spot Rates 8% 9% 10% b. Based on the given sequence of spot rates, what is the price of Bond Y? c. Based on the given sequence of spot rates, what is the yield-to-maturity of Bond Z? An investor purchases a nine-year, 7% annual coupon payment bond at a price equal to par value. After the bond is purchased and before the first coupon is received, interest rates increase to 8%. The investor sells the bond after five years. Assume that interest rates remain unchanged at 8% over the five-year holding period. d. Per 100 of par value, calculate the future value of the reinvested coupon payments at the end of the holding period. e. Calculate the capital gain/loss per 100 of par value resulting from the sale of the bond at the end of the five-year holding period. f. Assuming that all coupons are reinvested over the holding period, calculate the investor's five-year horizon yield. g. An investor buys a 6% annual payment bond with three years to maturity. The bond has a yield-to-maturity of 8% and is currently priced at 94.845806 per 100 of par. What is the bond's Macaulay duration? h. Recommend a corporate bond issued by a company in your country and provide basic information of this bond (such as issuer, parent company, coupon rate, coupon type, coupon frequency, redemption date, issue date, issue price, currency, minimum initial investment, etc.). ●Calculate the YTM of this bound by assuming the interest rate is the risk-free rate in your country. ●Analyze the interest risk of holding this bond. ●Analyze the credit risk of this bond using the knowledge we learned in the class, such as Four Cs (Capacity, Collateral, Covenants, and Character), sovereign risk and bond rating Maturity 3 years 3 years 3 years Bond Coupon Rate X 8% Y 7% Z 6% All three bonds pay interest annually. a. Based on the given sequence of spot rates, what is the price of Bond X? Spot Rates 8% 9% 10% b. Based on the given sequence of spot rates, what is the price of Bond Y? c. Based on the given sequence of spot rates, what is the yield-to-maturity of Bond Z?
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d Per 100 of par value calculate the future value of the reinvested coupon payments at the end of the holding period Annual coupon payment 7 of par value 7 Coupon payments are received annually Number ... View the full answer
Related Book For
Intermediate Accounting
ISBN: 978-0077400163
6th edition
Authors: J. David Spiceland, James Sepe, Mark Nelson
Posted Date:
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