Question: Please help solve correctly with explanations Questions 15-18 are based on the following information. Bond amortization. Today, you bought one corporate semi-annual bond with $1,000

 Please help solve correctly with explanations Questions 15-18 are based onthe following information. Bond amortization. Today, you bought one corporate semi-annual bondwith $1,000 par value, 8% coupon rate, 10 years left to maturity.The current interest rate of the bond is 10%. 15. What is

Please help solve correctly with explanations

Questions 15-18 are based on the following information. Bond amortization. Today, you bought one corporate semi-annual bond with $1,000 par value, 8% coupon rate, 10 years left to maturity. The current interest rate of the bond is 10%. 15. What is the price of the bond today? a. $875.38 b. $877.11 c. $1,000.00 d. $1,135.90 16. How much interest (not just coupon) in total should the corporation pay you in the next five years? a. $400.00 b. $445.20 c. $447.40o d. $447.07 (Hint: you need to distinguish interest from coupon. Coupon par value x coupon rate, and interest -debt principal outstanding x interest rate of the debt. You also need to know that the "interest rate of the debt" is the market interest at the time of borrowing, not the market interest rate in subsequent periods.) 17. How much will the corporation owe you at the end of the fifth year? a. $1,081.11 b. $922.78 c. $924.18 d. $1000.00 18. Suppose the market interest rate does not change in the next ten years and the corporation does not default on the bond, which of the following statements about the bond's price over the next 10 years is TRUE? a. The bond's price is decreasing over time until it becomes $1,000 at the time of maturity. b. The bond's price is unchanged over time. c. The bond's price is increasing over time until it becomes $1,000 at the time of maturity. d. The bond's price is undetermined Questions 15-18 end. Questions 19-21 are based on the following information. Bond investment. Suppose, you are a bond portfolio manager. The composition of your portfolio is as follows. 1-year Treasury note (180 days till maturity): 10% 5-year Treasury note (2 years till maturity): 20% 10-year Treasury note (9 years till maturity): 25% 30-year Treasury bond (8 years till maturity): 15% 30-year Corporate bond (10 years till maturity): 30% You are pessimistic about the economy and hence predict the Fed will cut the interest rate further by 50 basis points. 19. Usually, which of the following bonds in your portfolio has the highest yield? a. 1-year T-note b. 5-year T-note c. 30-year T-bond d. 30-year corporate bond 20. If you don't adjust the composition of your bond portfolio according to the prediction, then a. the total value of the portfolio will increase. b. the total value of the portfolio will decrease. c. the total value of the portfolio will unchanged. d. none of the above. 21. Which of the followings in your bond portfolio will be affected the most by the market interest rate drop? a. 1-year T-note b. 5-year T-note c. 10-year T-note d. 30-year T-bond Questions 19-21 end

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer
Step: 1 Unlock blur-text-image
Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock
Step: 3 Unlock

Students Have Also Explored These Related Finance Questions!