A corporate bond maturing in 5 years carries a 10% coupon rate and has an yield to maturity of 14% Author: Information Technology Last modified by: PKADAPAK Created Date: 3/8/2005 6:36:00 PM Company: University of Texas @ San Antonio Other titles: A corporate bond maturing in 5 years carries a 10% coupon rate and has an yield to maturity of 14%
Suppose the annual yield on a 2-year T-bond is 6%, while that on a 1-year T-bond is 5%. The real risk-free rate (r*) is 3%, and the maturity risk premium is zero. 31. Using the expectation theory, what should be the interest rate on a 1-year T-bond during the second year (or the forward rate between year 1 and year 2)? (c) 9% b. 8% c. 7% d. 6% e.
A 5-year corporate bond has a higher yield than a 5-year Treasury security. A 5-year corporate bond has a higher yield than a 7-year Treasury security. Statements a and b are correct. All of the above statements are correct. For the foreseeable future, the real risk-free rate of interest, k*, is expected to remain at 3 percent.
The coupon payments on a corporate bond equal $100,000 per year. But you only keep $75,000 because you are in the 25% tax bracket. Therefore your after-tax yield is only 7.5% 4. Consider the decision to purchase either a 5-year corporate bond or a 5-year municipal bond. The corporate bond is a 12% annual coupon bond with a par value of $1,000.
2. (15) A bond has an annual 8 percent coupon rate, a maturity of 10 years, a face value of $1,000, and makes semiannual payments. The bond is callable in 5 years for $1080, and it sells for $934.96. a. (8) Calculate the annual nominal yield to maturity. b. (7) Calculate the annual nominal yield to call on the bond…
Suppose a 10-year, 10 percent, semiannual coupon bond with a par value of $1,000 is currently selling for $1,135.90, producing a nominal yield to maturity of 8 percent. However, the bond can be called after 5 years for a price of $1,050.
ProbSet Chapter 6 – Bond Valuation. 1. A 10-year corporate bond has an annual coupon payment of 9 percent. The bond is currently selling at par ($1,000). Which of the following statements is true about this bond? a. The bond’s yield to maturity is 9 percent. b. The bond’s current yield is 9 percent. c.
One-year Treasury securities yield 4.78%. The market anticipates that 1 year from now, 1-year Treasury securities will yield 5.29%. If the pure expectation theory is correct, what should be the yield today for 2-year Treasury securities? (1 + x)2 = (1 + .0478) * (1 + .0529) (1 + x)2 = 1.1032. Take the square root of both sides to get ride of the 2
When the yield falls from 9 to 7%, the price of the 30-year bond increases $226.83 but the price of the 4-year bond only increases $66.27. Another way to compare the bonds’ sensitivity to changes in the yield is to look at the percentage change in the prices.
A 5-year corporate bond has an 8 percent yield. A 10-year corporate bond has a 9 percent yield. The two bonds have the same default risk premium and liquidity premium. The real risk-free rate, k*, is expected to remain constant at 3 percent. Inflation is expected to be 3 percent a year …
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