Ch7 HW

# Ch7 HW - Coupon Eqaution C[1 1(1 r)^T/r FVbond(1 r)^T...

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Francis Roman Chapter 7 March 21, 2008 1. Given Is the yield to maturity on a bond the same thing as the required return? Is the YTM the same thing as the coupon rate? 10% Coupon bond sells at par 2 years from now, the required return on the same bond is 8% Eqaution C * [1 - 1/(1+r)^T]/r + FVbond/(1+r)^T Solution Yes No Coupon rate is 10% (life of bond). The YTM is also the same. 2. Given 7% Coupon, 20-year bond Interest rates rise 15% Eqaution C * [1 - 1/(1+r)^T]/r + FVbond/(1+r)^T Solution If interests rates rise, bond values go down. You are dividing by a larger number. 3. Given 8% Coupon 10 yrs to mat. 9% YTM \$1000 FVbond Eqaution C * [1 - 1/(1+r)^T]/r + FVbond/(1+r)^T Solution \$935.82 4. Given 7% coupon 9yrs TTM ? YTM \$1080 PVbond \$1000 FVbond Eqaution C * [1 - 1/(1+r)^T]/r + FVbond/(1+r)^T Solution YTM = 5.83% 5. Given 16yrs TTM 7.5% YTM \$870 PVbond \$1000 FVbond

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Unformatted text preview: ? Coupon Eqaution C * [1 - 1/(1+r)^T]/r + FVbond/(1+r)^T Solution 6.0779% Coupon rate 6. Given 7.8% or 3.9% Coupon rate 8.6% or 4.3% YTM 10 or 20 TTM \$1000 FVbond Eqaution C * [1 - 1/(1+r)^T]/r + FVbond/(1+r)^T Solution \$947.05 7. Given 9.2% or 4.6% Coupon rate ? YTM \$1040 PV 10 or 20 TTM \$1000 FVbond Eqaution C * [1 - 1/(1+r)^T]/r + FVbond/(1+r)^T Solution 8.60% YTM 8. Given 14.5 or 29 TTM 6.8 or 3.4% YTM 1136.50 PV 1000 FV Eqaution C * [1 - 1/(1+r)^T]/r + FVbond/(1+r)^T Solution 8.29% 9. Given 8% R 4.5% h ?r Equation 1 + R = (1 + r)(1 + h) Solution 3.3493% 10. Given ?R 5.8% h 4% r Equation 1 + R = (1 + r)(1 + h) Solution 10.03% R 11. Given 15% R 7% h ? r Equation 1 + R = (1 + r)(1 + h) Solution 7.48% 12. Given 14.2% R ?h 5.3% r Equation 1 + R = (1 + r)(1 + h) Solution 8.45%...
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