Exam 18: The Analysis and Valuation of Bonds

Exhibit 18.2 Use the Information Below for the Following Problem(S) Talmart Corporation bonds have a $1,000 face value and will mature in 4 years. The bonds have a 7% coupon rate. Interest is paid annually and the required rate of return is 6 percent for these bonds. -Refer to Exhibit 18.2.What is the price of the Talmart corporate bonds?

Modified duration is determined by making small adjustments to Macaulay duration.

The nominal yield of a bond is the

Option adjusted duration can be calculated as

For a bond the present value model incorporates both the coupon receipts and the capital gain or loss.

If the coupon payments are not reinvested during the life of the issue then the

Yield to maturity and current yield are equal when the bond is selling for exactly par value.

Suppose the current 6 year spot rate is 8% and the current 5 year spot rate is 7%.What is the one year forward rate in five years?

Exhibit 18.1 Use the Information Below for the Following Problem(S) A $1000 par value bond with 5 years to maturity and a 6% coupon has a yield to maturity of 8%. Interest is paid semiannually. -Refer to Exhibit 18.1.Calculate the Macaulay duration for the bond.

For a given change in yield bond price volatility is inversely related to coupon.

Which term-structure hypothesis suggests that any long-term interest rate simply represents the geometric mean of current and future on-year interest rates expected to prevail over the maturity of the issue?

If the price before yields changed was $925,what is the resulting price?

The fundamental determinants of interest rates are the real risk free rate,inflation,and the risk premium.

If the price before yields changed was $950,what is the resulting price?

The term structure of interest rates is a dynamic function that relates the term to maturity to the yield to maturity of bonds.

Consider a bond with a duration of 6 years having a yield to maturity of 8% and interest rates are expected to rise by 50 basis points.What is the percentage change in the price of the bond?

Which of the following statements is true?

The best way for an investor to "lock in" to high interest rates would be to purchase a bond that has a ____ coupon and a ____ term to maturity.

Consider a bond with a current yield of 8% and a price of $1,250.What is this bond's coupon?

What is the current price of a zero coupon bond with a 7% yield to maturity that matures in 20 years?