Homework answers / question archive / Question 1 15 / 15 pts  In April 2016 Treasury 4 3/4s of 2040 offered a semiannually compounded yield to maturity of 2

Question 1 15 / 15 pts  In April 2016 Treasury 4 3/4s of 2040 offered a semiannually compounded yield to maturity of 2

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Question 1

15 / 15 pts

 In April 2016 Treasury 4 3/4s of 2040 offered a semiannually compounded yield to maturity of 2.80%. Recognizing that coupons are paid semiannually, calculate the bond's price. Assume face value is $1,000. (round to nearest whole dollar)

 

Question 2

15 / 15 pts

The interest rate is 9% and the expected annual inflation rate is 4.5%.What is the expected real interest rate? (round to nearest 1 tenth of a percent)

 

Question 3

15 / 15 pts

A bond's credit rating provides a guide to its price. Assume Aaa bonds yield 3.3% and Baa bonds yield 4.2%. Assume you want to buy a 6% three-year bond with annual coupons and a face value of $1,000.  How much should you pay for the bond if it is rated as Aaa? (round to nearest whole dollar)

 

Question 4

15 / 15 pts

A mortgage requires you to pay $2,000 at the end of each month for the next 30 years. The annual interest rate is 6%. What is the balance of the mortage at the end of 5 years? (round to nearest whole dollar)

 

Question 5

15 / 15 pts

You are quoted an interest rate of 6.25% on an investment of $5 million. What is the value of your investment after five years if interest is compounded monthly?

(answer in millions.  round to 1 decimal)

 

Question 6

12.5 / 12.5 pts

What is the yield to maturity of a bond priced at 98% of par value, maturing in 5 years with a 5% annual coupon? (round answer to nearest 2 decimals)

 

Question 7

12.5 / 12.5 pts

What is the yield to maturity of a bond priced at 103% of par value, maturing in 6 years with a 5% annual coupon, paid semi-annually? (round to 2 decimals)