Intermediate Calculations Assignment
Added on 2021-06-17
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A 9-year bond has a yield of 8.5% and a duration of 8.489 years. If the market yield changes by 90 basis points, what is the percentage change in the bond’s price?(Do not round intermediate calculations. Input the amount as a positive value.Round your answer to 2 decimal places. Omit the "%" sign in your response.)The percentage change in the bond’s price is%.rev: 02_24_2016_QC_CS-43398Find the duration of a 4% coupon bond makingannualcoupon payments if it has 3 years until maturity and has a yield to maturity of 4%. What is the duration if the yield to maturity is 6%? Note: The face valueof the bond is $1,000.(Do not round intermediate calculations. Round your answers to 3 decimal places.)Duration4% YTMyears 6% YTMyears You will be paying $9,200 a year in tuition expenses at the end of the next 2 years. Bonds currently yield 6%.a.What is the present value and duration of your obligation?(Do not round intermediate calculations. Round "Present value"to 2 decimal places and "Duration" to 4 decimal places. Omit the "$" sign in your response.)Present value$Durationyears b.What maturity zero-coupon bond would immunize your obligation?(Do not round intermediate calculations.Round "Duration" to 4 decimal places and "Face value"to 2 decimal places.Omit the "$" sign in your response.)Durationyears Face value$70.422.8862.83316867.21.48541.485418392.2
Suppose you buy a zero-coupon bond with value and duration equal to your obligation.c-1.Now suppose that rates immediately increase to 8%. What happens to your net position, that is, to the difference between the value of the bond and that of your tuition obligation?(Do not round intermediate calculations. Input the amount as a positive value. Round your answer to 2 decimal places. Omit the "$" sign in your response.)Net positionin value by$c-2.Now suppose that rates immediately falls to 4%. What happens to your net position, that is, to the difference between the value of the bond and that of your tuition obligation?(Do not round intermediate calculations. Input the amount as a positive value. Round your answer to 2 decimal places. Omit the "$" sign in your response.)Net positionin value by$A newly issued bond has a maturity of 10 years and pays a 7.6% coupon rate (with coupon payments coming once annually). The bond sells at par value.a.What are the convexity and the duration of the bond? Use the formula for convexity in footnote 7.(Round your answers to 3 decimal places.)ConvexityDurationyears b.Find the actual price of the bond assuming that its yield to maturity immediately increases from 7.6% to 8.6% (with maturity still 10 years). Assume a par value of 100.(Round your answer to 2 decimal places. Omit the "%" sign in your response.)Actual price of the bond% c.What percentage price changewould be predicted by the duration ruleWhat is the percentage error of that rule?(Negative answers should be indicated by a minus sign. Round your answers to 2 decimal places. Omit the "%" sign in your response.)Percentage price change% decreases0.72decreases0.7962.2467.3526.626.83
Percentage error% d.What percentageprice change would be predicted by the duration-with-convexity ruleWhat is the percentage error of that rule?(Negativeanswers should be indicated by a minus sign. Round your answers to 2 decimal places. Omit the "%" sign in your response.)Percentage price change% Percentage error% rev: 03_31_2015_QC_CS-12296The common stock of the P.U.T.T. Corporation has been trading in a narrow price range for the pastmonth, and you are convinced it is going to break far out of that range in the next 6 months. You do notknow whether it will go up or down, however. The current price of the stock is $90 per share, and theprice of a 6-month call option at an exercise price of $90 is $8.69.a.If the risk-free interest rate is 7% per year, what must be the price of a 6-month put option on P.U.T.T.stock at an exercise price of $90? (The stock pays no dividends.)(Do not round intermediatecalculations.Round your answer to 2 decimal places. Omit the "$" sign in your response.)Put-call parity$b.What would be a simple options strategy to exploit your conviction about the stock price’s futuremovements? How far would it have to move in either direction for you to make a profit on your initialinvestment?(Round your intermediate calculationsand final answer to 2 decimal places. Omitthe "$" sign in your response.)Total cost of the straddle$You buy a share of stock, write a 1-year call option with X = $30, and buy a 1-year put option with X = $30. Your net outlay to establish the entire portfolio is $28.6. The stock pays no dividends.What is the risk-free interest rate?(Do not round intermediate calculations.Round your answer to 2 0.216.520.014.5013.84
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