Question regarding the face value of the bond

Assignment Help Finance Basics
Reference no: EM131041702

The yield to maturity on one-year zero-coupon bonds is currently 7%, and the yield to maturityon two-year zeros is 8%. The Treasury plans to issue a two-year maturity coupon bond, payingcoupons once per year with a coupon rate of 9%. The face value of the bond is $100.

(a) At what price will the bond sell?

(b) What will the yield to maturity on the bond be?

(c) If the expectations theory of the yield curve is correct, what is the market expectation of theprice that the bond will sell for next year?

(d) Recalculate your answer to (c) if you believe in the liquidity preference theory, and that theliquidity premium is 1%.

Reference no: EM131041702

Questions Cloud

Question regarding the investment banking firm : What arbitrage opportunity is available for an investment banking firm? What is the profit on the activity?
Publisher encounter with the recommended methods : A textbook publisher is interested in selling individual book chapters on the Web. What types of e-payment methods would you recommend to the publisher? What sorts of problems will the publisher encounter with the recommended methods?
Discuss backup plans and any devices that you use : In this week's discussion, discuss what you think you should do to protect your work on the computer. Discuss backup plans and any devices that you use for the backup of your information.
Specialty rehabilitation center for competitors : Prepare EFE and CPM matrixes for Waverly Health and Rehabilitation Center. Use Courtland Health & Rehabilitation Center and Sentara Obici Specialty Rehabilitation Center for competitors in the CPM.
Question regarding the face value of the bond : The yield to maturity on one-year zero-coupon bonds is currently 7%, and the yield to maturityon two-year zeros is 8%. The Treasury plans to issue a two-year maturity coupon bond, payingcoupons once per year with a coupon rate of 9%. The face valu..
What is the difference between model - theory and framework : Differentiate between specialty nursing practice and advanced practice nursing by comparing and contrasting these levels of practice in the following dimensions: knowledge base, scope of practice, credentialing, and regulation.
The impact of social media on contemporary communication : "The impact of social media on contemporary business communication." Research, discuss and explain the fundamental opportunities and challenges that this creates for modern businesses
Sell for a premium or a discount : You currently own a 30 year Treasury Bond at 4% interest, paid semiannually. The market interest rates for like securities rose to 5%. Would your bond sell for a premium or a discount?
Major sources of variability in production schedules : What are the major sources of variability in production schedules? Why level production? What advantages are offered over nonlevel production? Discuss the requirements for level production schedules.

Reviews

Write a Review

Finance Basics Questions & Answers

  What is the amount of the deductible ira contribution

What is the amount of the deductible IRA contribution that John and Mary can make for 2013 assuming that both earn more than $7,000?

  What npv is calculated using this method

What NPV is calculated using this method? The initial investment in the project is $45,000. The firm's cost of capital is 12%, however projects in this risk class have a 14% required rate of return. The risk-free rate is 8%.

  Amount you borrowed from the broker

Assume you purchased 600 shares of XYZ common stock on margin at $40 per share from your broker. If the initial margin is 60% and the maintenance margin is 30%, the amount you borrowed from the broker is

  Identify the web site-sender

Find a Web site that has an "About Us" section or a "Press Release" section. Write a three to four (3-4) page paper addressing the following: Identify the Web site, the sender, and perceived receiver.

  What is the wacc if gallaghers total capital expenditure

What is the WACC if Gallagher's total capital expenditure is expected to be $8.5 million?

  How much should the dollar change in value during next year

What should the Japanese prime rate be? According to forward parity, by how much should the dollar change in value during the next year?

  A firm has beginning inventory of 400 units at a cost of 12

a firm has beginning inventory of 400 units at a cost of 12 each. production during the period was 700 units at 13

  Which one of the three risky funds do you choose

Choosing One Portfolio. The following table shows your predictions of the future returns on three mutual funds. Treasury Bills currently earn 4%. To invest all your wealth, you are limited to choosing a portfolio of only one of these three funds alon..

  The malbim company uses a process costing system materials

complete the following exercise. provide your answers in an msword document or as an excel spreadsheet with each

  What is the value of the firm

A firm has 110,000 shares of stock outstanding. The firm is considering borrowing $1.5 million at 7.5% interest and using the loan proceeds to repurchase 30,000 shares of stock. What is the value of the firm? Ignore taxes.

  How does risk depend upon time variation in correlation?

How does risk depend upon time variation in correlation?

  How much will this account be worth at that time

For the last 19 years, Mary has been depositing $500 in her savings account , which has earned 5% per year, compounded annually and is expected to continue paying that amount. Mary will make one more $500 deposit one year from today. If Mary close..

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd