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Calculate the nominal yield and current yield

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Reference no: EM132056894

Question: Problem-Solving for stocks and bonds:

(a) Calculate the nominal yield, current yield, and yield-to-maturity for a 30-year bond that has a face value of $1,000, sells for $1275.29, and pays an annual coupon payment of $80, when the market interest (i.e., discount) rate is 6%.

(b) Calculate the nominal yield, current yield, and yield-to-maturity for a 20-year bond that has a face value of $1,000, sells for $788.12, and pays an annual coupon payment of $50, when the market interest rate is 7%.

(c) Calculate the duration of a $1,000 bond that has a maturity of five years, an annual coupon rate of 5%, and sells for its present value of $810.46, with a yield to maturity of 10%.

(d) Calculate the percentage change in the market price of a bond that has a duration of 7 years, if its yield to maturity increased from 6% to 8%.

(e) Calculate Sharpe's measure and Treynor's measure of risk premium for each of the following portfolios, and determine which is the better performing portfolio: (1) Portfolio A, with ip = 16%, if = 4%, standard deviation = 6%, and beta = 1.3; (2) Portfolio B, with ip = 14%, if = 4%, standard deviation = 3%, and beta of 0.9%.

Reference no: EM132056894

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