Question
1. In April 2016 Treasury 4 3/4s of 2040 offered a semiannually compounded yield to maturity of 2.80%. Recognizing that coupons are paid semiannually, calculate
1. In April 2016 Treasury 4 3/4s of 2040 offered a semiannually compounded yield to maturity of 2.80%. Recognizing that coupons are paid semiannually, calculate the bond's price. Assume face value is $1,000. (round to nearest whole dollar)
2. The two-year interest rate is 9% and the expected annual inflation rate is 4.5%.What is the expected real interest rate? (round to nearest 1 tenth of a percent)
3- A bond's credit rating provides a guide to its price. Assume Aaa bonds yield 3.3% and Baa bonds yield 4.2%. Assume you want to buy a 6% three-year bond with annual coupons and a face value of $1,000. How much should you pay for the bond if it is rated as Aaa? (round to nearest whole dollar)
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started