MA373 F15 Homework Chapter 6

# MA373 F15 Homework Chapter 6 - Chapter 6 Section 2 1 Hanjie...

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October 15, 2015 Copyright 2013, 2014, 2015 Chapter 6 Section 2 1. Hanjie purchases a 10 year zero coupon bond for 500 and will be paid 1000 at end of 10 years. Calculate the annual effective return received by Hanjie. 2. A 20 year bond with a par value of 10,000 will mature in 20 years for 10,500. The coupon rate is 8% convertible semi-annually. Calculate the price that Abhijit would pay if he bought the bond to yield 6% convertible twice a year. 3. A 20 year bond with a 20,000 par value pays semi-annual coupons of 500 and is redeemable at par. Jaiyi purchases the bond for 21,000. Calculate Jaiyi’s semi- annual yield to maturity on the bond. 4. Marissa purchases 20 year bond. The bond matures for 100,000. The bond has annual coupons. The first coupon is 1000. The second coupon is 2000. The third coupon is 3000. The coupons continue to increase until the 20 th coupon is 20,000. Marissa purchase the bond to yield an annual effective rate of 8%. Calculate the price that Marissa pays for the bond. 5. Jie bought a 10 year bond four years ago. The bond matures for 100,000 which is the par value. The bond has a coupon rate of 9.2% convertible semi-annually. Jie paid 102,000 for the bond. Today the bond has exactly six years until maturity. Calculate the price at which Jie could sell the bond if: a. The bond is sold to yield the same yield that was used to when Jie bought the bond. b. The bond is sold to yield 8% convertible semi-annually. 6. Chloe buys a bond to yield 8% convertible semi-annually for a price of 19,001.44.

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