Financial Concepts Bond Pricing Exercise
Assume annual payments unless otherwise specified
1) What is the current value of a 10 year bond with a 8% coupon rate if the current market interest rate is 7.75%?
2) A zero coupon bond is sold at a discount and pays no cash interest during its lifetime. At maturity is pays the face value of the bond. What is the current value of a 8 year zero coupon bond if the current market interest rate is 4.85%
3) What is the current value of a10 year bond with a coupon rate of 8% (annual) with semi-annual payments if the current market interest rate is 7.9% (annual)?
4) What is the current value of a 10 year bond with a coupon rate of 8% with quarterly payments if the current market interest rate is 7.9%?
5) What is the Yield to Maturity (YTM) and Yield to Call (YTC) for a bond which is currently priced at 1060 if the bond has a coupon of 6%, matures in 8 years but could be called at a price of 1030 in 3 years.
6 a) Calculate the Value of the Bonds under the following assumptions:
6b) What do you conclude about the relative sensitivity of bond prices to changes in interest rate?
1) Longer maturities relative to shorter maturities?
2) High coupon bonds relative to lower coupon bonds?
Attachment:- Assignment File.rar