hmk2 - (b An investor buys the above bond today Immediately...

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Team Assignment 2 ( due: Tuesday, February 22 ) 1. Consider a bond that has a coupon rate of 10 % per year , with the coupons being paid semiannually . The yield to maturity is 8 % . The bond has 7 years until maturity and has a par value of \$ 1 , 000 . (a) Find the price of the bond today . (b) Assuming that the market interest rate for the above bond remains constant , estimate the expected price at which the bond can be sold after 1 year and 8 months from today . 2. A 20-year maturity , \$ 1 , 000 par value , 8 % coupon bond paying interest annually is callable in 5 years with a call premium of \$ 80 . The bond is currently priced at an yield to maturity of 9 % . (a) Estimate the Yield to Call
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Unformatted text preview: . (b) An investor buys the above bond today . Immediately after the purchase , the market interest rate falls to 7 % and stays at that level until maturity . If the investor sells the bond three years after the initial purchase , estimate the Realized Yield . Assume that the coupons are being reinvested at the market rate . 3. Today is May 8 , 2011 . A \$ 1 , 000 Face value Corporate bond with a coupon rate of 7 % makes semi-annual coupon payments on January 15 and July 15 of each year . The bond matures on July 15 , 2024 . How much would you pay for this bond today ? Assume that the market interest rate for this bond is 10 % ....
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This note was uploaded on 05/23/2011 for the course ECON 402 taught by Professor Kanner during the Spring '11 term at DePaul.

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