Reference no: EM13215011
Q1) 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?
Q2) The yield to maturity on 1-year zero-coupon bonds is currently 7%; the YTM on 2-year zeros is 8%. The Treasury plans to issue a 2-year maturity coupon bond, paying coupons 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 the price that the bond will sell for next year?
d. Recalculate your answer to (c) if you believe in the liquidity preference theory and you believe that the liquidity premium is 1%.
Q3) In addition to the zero-coupon bond, investors also may purchase a 3-year bond making annual payments of $ 45 with par value $ 1,000.
a. What is the price of the coupon bond?
b. What is the yield to maturity of the coupon bond?
c. Under the expectations hypothesis, what is the expected realized compound yield of the coupon bond?
d. If you forecast that the yield curve in 1 year will be flat at 6.5%, what is your forecast for the expected rate of return on the coupon bond for the 1-year holding period?
Q4) The spot rates of interest for five U.S. Treasury securities are shown in the following exhibit. Assume all securities pay interest annually.
a. Compute the 2-year implied forward rate for a deferred loan beginning in 3 years.
b. Compute the price of a 5-year annual-pay Treasury security with a coupon rate of 9% by using the information in the exhibit.
|
Exercise promotion and public relations strategy
: There are many ways to exercise promotion and public relations strategy. One way is to use humor to promote your product. Discuss a promotion that uses humor to achieve its goals.
|
|
Good marketing tool and why
: How effective is Wal-Mart's website in making it each to purchase goods? Elaborate on this. They are moving into service areas such as Hip to Site services:
|
|
Calculate the elasticity
: Suppose that when the price of coffee increases by 40%, the percentage change in quantity demanded by consumer is reduced by 10%. Calculate the elasticity.
|
|
What is the after-tax cost of debt
: Jiminy's Cricket Farm issued a 30-year, 6 percent, semiannual bond 8 years ago. The bond currently sells for 97 percent of its face value. What is the after-tax cost of debt if the company's tax rate is 32 percent?
|
|
Explain what is the price of the coupon bond
: What is the price of the coupon bond. What is the yield to maturity of the coupon bond. Under the expectations hypothesis, what is the expected realized compound yield of the coupon bond
|
|
Use moral hazard and risk aversion to describe
: In your opinion, discuss when it makes sense to forego purchasing car insurance (assuming the state did not require it). In your answer, use moral hazard and risk aversion to describe your decision.
|
|
What are its marginal cost and marginal revenue
: If the firm is currently producing 30 units, what are its marginal cost and marginal revenue at the current output level?
|
|
About the coding process
: Supoose you were helping a new office clerk who was curious about the coding process. How would you explain the use and purpose of the Alphabetic Index and Tabular List to the file clerk?
|
|
Historically high return stocks
: Historically high return stocks have exhibited lower risk than low return stocks - while the smart money knows this and is able to effectively arbitrage excess returns from low risk stocks? To what extent does this make sense? Discuss and elaborate..
|