Question
9. Consider a 9% semiannual coupon bond with 20 years to maturity and a face value of $1,000. Assume the YTM is 12%. Calculate the
9. Consider a 9% semiannual coupon bond with 20 years to maturity and a face value of $1,000. Assume the YTM is 12%. Calculate the bond price using both Method 1 (Bond Pricing Formula) or Method 2 (Sum of discounted cash flows).
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774.31
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775
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774.1
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774
10. Consider a 7% semiannual coupon bond with 30 years to maturity and a face value of US$1,000. Assume that the YTM is 12%;
Calculate the bond price.
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596.12
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595.96
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595.12
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595
11. Consider a 7% semiannual coupon bond with 20 years to maturity and a face value of US$1,000. Assume that the YTM is 12%;
Calculate the bond price.
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625
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623.84
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623.16
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623.48
12. Consider a zero-coupon bond with face value of US$1,000 and with a YTM of 6%? Using Method 1 (Bond Pricing Formula) calculate the bond price if the bond matures in 10 years and the price if it matures in 20 years.
Hint: In this case the bond pricing formula will reduce to a simple expression. Also, you should apply the formula as if the coupon payment period were semi-annual and therefore frequency of payment = 2, and a semi-annual YTM will be used to discount the cash flow. This is because yields are quoted on a bond-equivalent, rather than effective basis.
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10 yr price is 553.68 and 20 yr price is 306.56
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10 yr price is 553.68 and 20 yr price is 306.22
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10 yr price is 553.11 and 20 yr price is 306.56
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10 yr price is 553.11 and 20 yr price is 306.22
13. Suppose that the price of a bond is equal to $900. You know that using a YTM equal to 8% to discount the bond cash flows, you obtain a present value equal to $850. Hence, we can assume that the YTM will definitely be:
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Higher than 8%
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Lower than 8%
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Equal to 8%
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Cannot determine how large the YTM can be without further information
14. If the semi annual YTM equals to 6.0%, what are the Bond-Equivalent YTM and the Effective annual Yield, respectively?
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12.00% and 12.36%
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12.00% and 12.26%
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12.00% and 12.56%
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12.36% and 12.00%
15. What is the YTM of a $100 face value 15-year bond paying 7.5% annual coupons and priced at US$102.45?
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7.80%
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7.23%
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7.32%
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None of the above.
16. When the face value is higher than the bond price, the bond is trading:
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At a premium
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At par
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At a discount
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All of the above are possible
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None of the Above
17. A bond is trading at a premium when:
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Its coupon rate is lower than the YTM
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Its coupon rate is equal to the YTM
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Its coupon rate is higher than the YTM
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None of the Above
18. Suppose you have a 20-year bond paying 8% semiannual coupon, with face value of US$1,000. Assuming that YTM is 7%, 8% and 9%, calculate the bond price over time, that is, as we approach maturity.
As we approach maturity, what happens to the price of the bond?
Hint: Leaving the maturity date constant, change the settlement date by one year at a time to reflect the passage of time.
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The bond price converges toward the face value.
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The bond price diverges from its face value.
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The bond can converge or diverge depending on whether it is premium or discount.
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There is no clear pattern in how the bond price moves over time.
19. When comparing the time path of a premium, par and discount bond, the discounted coupon payment is the highest for:
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Premium bond
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Par bond
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Discount bond
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None of the above, they cross
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