{[ promptMessage ]}

Bookmark it

{[ promptMessage ]}

Problem+Set+7

# Problem+Set+7 - annually Why are the yields you compute...

This preview shows page 1. Sign up to view the full content.

Problem Set 7: Chapter 14 6. Which Security has a higher effective annual interest rate? a. A 3-month T-bill selling at \$97,645 with par value \$100,000. b. A coupon bond selling at par and paying a 10% coupon semiannually. 8. Consider a bond with a 10% coupon and a yield to maturity =8%. If the bond’s yield to maturity remains constant, then in 1 year, will the bond price be higher, lower or unchanged? 11. A 20-year maturity bond with par value of a \$1,000 makes semiannual coupon payments at a coupon rate of 8%. Find the bond equivalent and effective annual yield to maturity of the bond if the bond price is: a. \$950. b. \$1,000. c. \$1,050. 12. Repeat problem 11 using the same data, assuming that the bond makes its coupon payments
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: annually. Why are the yields you compute lower this time? 21. A 30-year maturity, 8% coupon bond paying coupons semiannually is callable in 5 years at a call price of \$1,100. The bond currently sells at a yield to maturity of 7% (3.5% per half-year). a. What is the yield to call? b. What is the yield to call if the call price is only \$1,050? c. What is the yield to call if the call price is \$1,100, but the bond can be called in 2 years instead of 5 years? 23. A 2-year bond with par value \$1,000 making annual coupon payments of \$100 is priced at \$1,000. What is the yield to maturity of the bond? What will be the realized compound yield to maturity if the 1 year interest rate next year turns out to be(a ) 8%, (b) 10%, (c)12%?...
View Full Document

{[ snackBarMessage ]}

Ask a homework question - tutors are online