Questions from General Investment

Q: Which security has a higher effective annual interest rate? a

Which security has a higher effective annual interest rate? a. A three-month T-bill with face value of $100,000 currently selling at $97,645. b. A coupon bond selling at par and paying a 10% coupon...

Q: Treasury bonds paying an 8% coupon rate with semiannual payments currently

Treasury bonds paying an 8% coupon rate with semiannual payments currently sell at par value. What coupon rate would they have to pay in order to sell at par if they paid their coupons annually?

Q: Consider a bond paying a coupon rate of 10% per year

Consider a bond paying a coupon rate of 10% per year semiannually when the market interest rate is only 4% per half-year. The bond has three years until maturity. a. Find the bond’s price today and s...

Q: A 20-year maturity bond with par value $1,

A 20-year maturity bond with par value $1,000 makes semiannual coupon payments at a coupon rate of 8%. Find the bond equivalent and effective annual yield to maturity of the bond if the bond price is:...

Q: Redo the previous problem using the same data, but now assume

Redo the previous problem using the same data, but now assume that the bond makes its coupon payments annually. Why are the yields you compute lower in this case?

Q: Return to Table 10.1, showing the cash flows for

Return to Table 10.1, showing the cash flows for TIPS bonds. a. What is the nominal rate of return on the bond in year 2? b. What is the real rate of return in year 2? c. What is the nominal rate o...

Q: What is the option embedded in a callable bond? A puttable

What is the option embedded in a callable bond? A puttable bond?

Q: Fill in the table below for the following zero-coupon bonds

Fill in the table below for the following zero-coupon bonds, all of which have par values of $1,000.

Q: A bond has a par value of $1,000,

A bond has a par value of $1,000, a time to maturity of 10 years, and a coupon rate of 8% with interest paid annually. If the current market price is $800, what will be the percentage capital gain of...

Q: A bond with a coupon rate of 7% makes semiannual coupon

A bond with a coupon rate of 7% makes semiannual coupon payments on January 15 and July 15 of each year. The Wall Street Journal reports the ask price for the bond on January 30 at 100.125. What is th...