Detailed solution please
1) Consider a bond with face value equal to $250,000 with a coupon rate of 8% paying two coupons per year. There are exactly eight years remaining and the yield to maturity is 8.5%. What is the price of this bond immediately before the current coupon is paid?
2) A bond paying annual coupons of 10% with exactly 2 years remaining until maturity has a face value of $100 and currently trades at a yield to maturity of 4.9307%. Two year zero coupon bonds currently trade at a yield of 5%. All bonds are risk-free.
What no-arbitrage price for one year zero coupon bond with face value of $100?
3) Imagine a portfolio of 10 zero coupon bonds, each with a face value of 1000, maturing in years 1 through 10. Note that the portfolio generates a cash flow equal to that of 10-year annuity paying 1000 dollars each year (starting in one year). What is the yield to maturity on the above portfolio of zero coupon bonds if the present value is approximately equal to $7360?
4) 26 A one year zero coupon bond is trading at a price of $90, a two year zero coupon is trading at $80, and the three year zero coupon bond is trading at $70. All bonds have a face value of 100 and are assumed to be risk free.
What is the price of a three-year 10% coupon bond?