1. You have to pay an annual coupon of 9% bond, the bond is traded in the market at USD 1,120, with a par value of USD 1,000. If the bond matures in 15 years:
a. What is the YTM Bond? YTM = YIELD TO MATURITY
b. What will be your Macaulay duration?
c. That percentage changes expected in the bond price if rates go i. 0.25%; ii. 0.5%; and iii. 0.75%?
2. Do you think investing a significant portion of its resources on Bond, you have an investment horizon of 5 years and its broker has given the following list of bonds, prices and features listed below:
a. Corporate bond sold at 105% semi-annual coupon paid to the order of 10.5% annually and has a face value of USD 1,000.
b. USD 1,110 corporate bond pays a coupon of 12% per annum with quarterly payments, the face value of the bond is $ 1,000
c. Corporate bond at 95.5%, 8.5% coupon, every six to around 11% in dollar coupon. Face value of USD 1,000.
Its portfolio you keep it in dollars. Which bond acquire assuming the same levels of risk for the three instruments?
3. Give a brief description of the following terms:
a. junk bond
b. convertible bond
c. perpetual bond
d. subordinated bond
e. Risk Rating
F. performance promise
g. YTC YIELD TO CALL
h. Yankee bonds
i. Duration of Macaluay.