Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

A bond trader purchased each of the following bonds at a yield to maturity of 9%. Immediately after she purchased the bonds, interest rates fell

image text in transcribedimage text in transcribedimage text in transcribed

A bond trader purchased each of the following bonds at a yield to maturity of 9%. Immediately after she purchased the bonds, interest rates fell to 5%. The data has been collected in the Microsoft Excel Online file below. Open the spreadsheet and perform the required analysis to answer the questions below. What is the percentage change in the price of each bond after the decline in interest rates? Assume annual coupons and annual compounding. Fill in the following table. Do not round intermediate calculations. Round your answers to two decimal places. Price @ 9% Price @ 5% Percentage Change 10-year, 10% annual % coupon % % 10-year zero 5-year zero 30-year zero $100 perpetuity % % D B D E F 10-year zero coupon bond Maturity terr 10 Coupon rate 0.00% Par value, FV $1,000.00 PMT $0.00 Original price at issue Price with changed yield to maturity Percentage change Formulas Original price Price with ch Percentage #N/A #N/A #N/A 1 Interest Rate Sensitivity 2 3 Original yiel 9.00% 4 Changed yiel 5.00% 5 6 10-year, 10% annual coupon bond 7 Maturity terr 10 8 Coupon rate 10.00% 9 Par value, FV $1,000.00 10 PMT 11 12 Original price at issue 13 Price with changed yield to maturity 14 Percentage change 15 16 Formulas 17 PMT #N/A 18 Original price #N/A 19 Price with ch #N/A 20 Percentage #N/A 21 22 5-year zero coupon bond 23 Maturity terr 5 24 Coupon rate 0.00% 25 Par value, FV $1,000.00 26 PMT $0.00 27 28 Original price at issue 29 Price with changed yield to maturity 30 Percentage change 31 32 Formulas 33 Original price #N/A 34 Price with ch #N/A 35 Percentage #N/A 36 37 Perpetuity, $100 annual coupon 38 Annual coupe $100 39 40 Original price at issue 41 Price with changed yield to maturity 42 Percentage change 43 44 Formulas 45 Original price #N/A 46 Price with ch #N/A 47 Percentage #N/A 30-year zero coupon bond Maturity terr 30 Coupon rate 0.00% Par value, FV $1,000.00 PMT $0.00 Original price at issue Price with changed yield to maturity Percentage change Formulas Original price Price with ch Percentage #N/A #N/A #N/A

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access with AI-Powered Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Students also viewed these Finance questions