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SampleMidterm.6 - b Consider a 2-year bond with a 5 coupon...

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Chapter 9 1. a. Consider a coupon bond that pays interest of $50 annually, has a par value of $1,000, matures in 5 years, and is selling today at a $1000.00. What is the actual yield to maturity on this bond? b. Consider a bond that costs $900 and matures in two years. The bond has an annual coupon rate of 8%. What is the yield to maturity on this bond? Give the formula, and solve. 2. a. One, two and three year maturity, default-free, zero-coupon bonds have yield- to-maturity of 2%, 2.19% and 2.12% respectively. What is the implied one-year forward rate, one year from today?
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Unformatted text preview: b. Consider a 2-year bond with a 5% coupon and a present yield to maturity of 8%. If interest rates remain constant, one year from now the price of this bond will be what? 5. The market price of a security is $40. Its expected rate of return is 13%. The risk free rate is 7%, and the market risk premium is 8%. What is beta for this security? If beta doubles (and all other variables remain unchanged) what will be the market price of this security? (Assume the security is expected to pay a constant dividend in perpetuity.)...
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