Exam 5: Bonds and Bond Valuation

You bought a 10-year, 6.20% semiannual coupon bond three years ago for its face value of $1,000. When you attempted to sell the bond today, you were told that the market price being offered today is $985.00. What is the current yield to maturity for this bond?

Use the following data to answer questions below You bought a newly issued 10-year, 5.50% coupon bond (with semiannual coupon payments) on May 1, 2018. You decided to check the value and yields on the bond annually, so that you can keep track of your wealth. Your first check was to be done on May 1, 2019. On April 15, 2019, the yield to maturity for the bond changed to 5.20%. Assume this new YTM remains the same throughout this set of problems. -For your two-year anniversary of owning the bond, calculate the market price, the current yield, the capital gains yield and the total yield for the bond for the past year. What has changed? To what do you attribute the change (specifically, not "the change in the YTM")?

Which of the following items is not used in calculating the value of a bond?

Use the following data to answer questions below You bought a newly issued 10-year, 5.50% coupon bond (with semiannual coupon payments) on May 1, 2018. You decided to check the value and yields on the bond annually, so that you can keep track of your wealth. Your first check was to be done on May 1, 2019. On April 15, 2019, the yield to maturity for the bond changed to 5.20%. Assume this new YTM remains the same throughout this set of problems. -For your four-year anniversary of owning the bond, calculate the market price, the current yield, the capital gains yield and the total yield for the bond for the past year. What has changed? To what do you attribute the change (specifically, not "the change in the YTM")?

If the yield to maturity on a bond increases, what will happen to the bond's capital gains yield?

Suppose a 10-year, 6% coupon bond is issued, and one year later similar bonds are issued paying 5.85% coupons. What will happen to the market value of the first bond?

Which of the following items is not a feature of a bond?

Use the following data to answer questions below You bought a newly issued 10-year, 5.50% coupon bond (with semiannual coupon payments) on May 1, 2018. You decided to check the value and yields on the bond annually, so that you can keep track of your wealth. Your first check was to be done on May 1, 2019. On April 15, 2019, the yield to maturity for the bond changed to 5.20%. Assume this new YTM remains the same throughout this set of problems. -For your one-year anniversary of owning the bond, calculate the market price, the current yield, the capital gains yield and the total yield for the bond for the past year. What has changed? To what do you attribute the change (specifically, not "the change in the YTM")?

You are interested in purchasing a newly issued $1,000 par, 20-year, 4.80% semiannual coupon bond. You believe that the yield to maturity on the bond will increase to 4.90% during the first year that you own the bond. Use the duration and modified duration that you calculated in problem 16 to estimate the percent change in the price if your belief in the YTM proves accurate.

If the yield to maturity on a bond increases, what will happen to the bond's current yield?

You are interested in purchasing a newly issued $1,000 par, 20-year, 4.80% semiannual coupon bond. While reading the indenture, you see that the bond has five years of call protection, and that the call premium is one interest payment. What is the yield to call for this bond?

Use the following data to answer questions below You bought a newly issued 10-year, 5.50% coupon bond (with semiannual coupon payments) on May 1, 2018. You decided to check the value and yields on the bond annually, so that you can keep track of your wealth. Your first check was to be done on May 1, 2019. On April 15, 2019, the yield to maturity for the bond changed to 5.20%. Assume this new YTM remains the same throughout this set of problems. -For your three-year anniversary of owning the bond, calculate the market price, the current yield, the capital gains yield and the total yield for the bond for the past year. What has changed? To what do you attribute the change (specifically, not "the change in the YTM")?

You are torn between investing in a 20-year US Treasury bond or the new 20-year bond that Google just issued. Which of the two should pay the higher coupon rate?

You are interested in purchasing a newly issued $1,000 par, 20-year, 4.80% semiannual coupon bond. Calculate the duration and the modified duration for the bond.

Use the following data to answer questions below You bought a newly issued 10-year, 5.50% coupon bond (with semiannual coupon payments) on May 1, 2018. You decided to check the value and yields on the bond annually, so that you can keep track of your wealth. Your first check was to be done on May 1, 2019. On April 15, 2019, the yield to maturity for the bond changed to 5.20%. Assume this new YTM remains the same throughout this set of problems. -For your five-year anniversary of owning the bond, calculate the market price, the current yield, the capital gains yield and the total yield for the bond for the past year. What has changed? To what do you attribute the change (specifically, not "the change in the YTM")?

You are concerned about your bond portfolio because market interest rates are expected to fall. Which of these items is also expected to fall?

On June 1, 2018, the US Treasury issued new 20-year, $1,000 par value bonds paying a 4.40% coupon semiannually. On June 1, 2019, similar T-bonds were paying 4.65% coupons. What was the market value of the 2018 bonds as of June 1, 2019?