my question is Q19, interest tate risk , thank you so much !
000. What is wrrently payme vate te le of 1.9 percent and the n of 11.5 per this investment will be over the had a total retur maturity on this bond is 3.9 percent, and the bond has a par value of $5,000 the price of the bond? 12. Calculating Real Rates of Return [LO4] If Treasury bills are current 5.1 percent and the inflation rate is 2.2 percent, what is the approximate re interest? The exact real rate? 13. Inflation and Nominal Returns [LO4] Suppose the real rate is 1.9 percen inflation rate is 3.1 percent. What rate would you expect to see on a Treasury 14. Nominal and Real Returns [LO4] An investment offers a total return of i cent over the coming year. Janice Yellen thinks the total real return on this in will be only 9 percent. What does Janice believe the inflation rate will be next year? 15. Nominal versus Real Returns [LO4] Say you own an asset that had a total last year of 11.65 percent. If the inflation rate last year was 3.4 percent, who your real return? 16. Using Treasury Quotes (LO2) Locate the Treasury issue in Figure 7.4 maturin February 2038. What is its coupon rate? What is its bid price? What was the pre day's asked price? Assume a par value of $10,000. 17. Using Treasury Quotes (LO2) Locate the Treasury bond in Figure 7.4 maturinn August 2039. Is this a premium or a discount bond? What is its current yield? Wh is its yield to maturity? What is the bid-ask spread in dollars? Assume a par value $10,000 NTERMEDIATE 18. Bond Price Movements (LO2) Bond X is a premium bond making semiannus Jestions 18-31) payments. The bond pays a coupon rate of 8.5 percent, has a YTM of 7 percent, and has 13 years to maturity. Bond Y is a discount bond making semiannual payments This bond pays a coupon rate of 7 percent, has a YTM of 8.5 percent, and also has 13 years to maturity. What is the price of each bond today? If interest rates remain unchanged, what do you expect the price of these bonds to be one year from now? la three years? In eight years? In 12 years? In 13 years? What's going on here? Illustrate your answers by graphing bond prices versus time to maturity. 19. Interest Rate Risk (LO2) Both Bond Sam and Bond Dave have 6.5 percent coupons, make semiannual payments, and are priced at par value. Bond Sam has 3 years to maturity, whereas Bond Dave has 20 years to maturity. If interest rates suddenly rise by 2 percent, what is the percentage change in the price of Bond Sam! Or Bond Dave? If rates were to suddenly fall by 2 percent instead, what would the percentage change in the price of Bond Sam be then? Of Bond Dave? Illustrate your answers by graphing bond prices versus YTM. What does this problem tell you about the interest rate risk of longer-term bonds? 20. Interest Rate Risk (LO2) Bond J has a coupon rate of 3 percent. Bond Khas coupon rate of 9 percent. Both bonds have 19 years to maturity, make semiannum payments, and have a YTM of 6 percent. If interest rates suddenly rise by 2 perc.com what is the percentage price change of these bonds? What if rates suddenly tam 2 percent instead? What does this problem tell you about the interest rate risk lower-coupon bonds? x 21. Bond Yields (LO2) Bourdon Software has 6.4 percent coupon bonds on the man with 18 years to maturity. The bonds make semiannual payments and currently se for 106,8 percent of par. What is the current vield on the bonds? The YIM effective annual yield
