Question
9a. You are considering the purchase of a Pure Discount Bond with a Face Value of $10,000, which matures in seventy-four days. If you desire
9a. You are considering the purchase of a Pure Discount Bond with a Face Value of $10,000, which matures in seventy-four days. If you desire a return of 2.45%, how much would you bid for the bond today? (Round your answer to two decimal place, e.g. 9,274.36)
Incorrect answer: $ 9949.64
b. Suppose that you decided to purchase the bond described above for the calculated price. Now assume that immediately after you purchased the bond, the rate rises by 15 Basis Points. What will now be the price of the bond after this rise in rates? (Round your answer to two decimal place, e.g. 9,274.36)
Incorrect answer: $ 9946.56
c. You are considering the purchase of a Pure Discount Bond with a Face Value of $10,000, which matures in sixty-three days. In the markets this bond is selling for $9,936.66. If you purchase the bond at this price what is the Yield-to-Maturity (YTM) on the investment? (The answer is a percent, round your answer to two decimal place, e.g. 4.75)
Incorrect answer: New Bond Price = 10000 x [1-(y) x (63/360)] = $ 9936.66y = 0.03619 or 3.619% ~ 3.62 %
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