Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

please answer 5-6-7 The following table shows 4 coupon bonds. All bonds have same face value of $100, and same coupon rate of 10%. Today

please answer 5-6-7

image text in transcribed

image text in transcribed

The following table shows 4 coupon bonds. All bonds have same face value of $100, and same coupon rate of 10%. Today (at time t), you buy bonds, which are held for one year. Next year (at time t+1), you sell the bonds. Today (at time t), interest rate is 20%. Suppose next year (at time t+1), interest rate decreases to 15%. Answer the following questions. Round your result to 2 decimal places. Bond No. Price at t ($) at Years to Ma- turity at t Current Yield (at t) (%) NA Price t+1(8) Rate of Capi- Rate of Re- tal Gain (%) turn (%) NA #1 #2 20 10 5 1 851.30 $58.08 NA $76.14 34.52% 31.10% NA NA NA NA NA NA (4) For Bond #3: what is price next year? You are given the following information: 1.22 = 1.44, 1.22 = 1.73, 1.24 = 2.07, 1.26 = 2.49, 1.152 = 1.32, 1.15% = 1.52, 1.154 = 1.75, 1.15% = 2.01. (3 points) (5) For Bond # 4: what is price this year? (3 points) (6) For Bond #4: what is price next year? (3 points) (7) If today, you know for sure that interest rate would decrease in the future, would you want to buy longer-term bonds or shorter-term bonds? Why? (2 points) The following table shows 4 coupon bonds. All bonds have same face value of $100, and same coupon rate of 10%. Today (at time t), you buy bonds, which are held for one year. Next year (at time t+1), you sell the bonds. Today (at time t), interest rate is 20%. Suppose next year (at time t+1), interest rate decreases to 15%. Answer the following questions. Round your result to 2 decimal places. Bond No. Price at t ($) at Years to Ma- turity at t Current Yield (at t) (%) NA Price t+1(8) Rate of Capi- Rate of Re- tal Gain (%) turn (%) NA #1 #2 20 10 5 1 851.30 $58.08 NA $76.14 34.52% 31.10% NA NA NA NA NA NA (4) For Bond #3: what is price next year? You are given the following information: 1.22 = 1.44, 1.22 = 1.73, 1.24 = 2.07, 1.26 = 2.49, 1.152 = 1.32, 1.15% = 1.52, 1.154 = 1.75, 1.15% = 2.01. (3 points) (5) For Bond # 4: what is price this year? (3 points) (6) For Bond #4: what is price next year? (3 points) (7) If today, you know for sure that interest rate would decrease in the future, would you want to buy longer-term bonds or shorter-term bonds? Why? (2 points)

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored 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

Recommended Textbook for

More Books

Students also viewed these Finance questions

Question

2. What are the main features of intelligent agents?

Answered: 1 week ago