5. (Valuing zero coupon bonds). You are planning to buy a zero-coupon bond with a par value of $1,000 and 21 years to ma
Posted: Tue Nov 16, 2021 8:26 am
5. (Valuing zero coupon bonds). You are planning to buy a
zero-coupon bond with a par value
of $1,000 and 21 years to maturity. The yield to maturity on this
bond is 4.3 percent. Assume
semiannual compounding periods. How much price you are willing to
pay for this bond?
6. Treasury bills are currently paying 5 percent and the inflation
rate is 2.5 percent.
a. What is the approximate real rate of interest?
b. What is the exact real rate?
7. Suppose the real rate is 3.8 percent and the inflation rate is
5.4 percent. What rate would you
expect to see on a Treasury bill?
8. How does interest rate impact both personal and corporate
decision making?
9. How can you tell whether a bond should sell at par, discount, or
premium by looking at coupon
rate and YTM?
10. Differentiate nominal and real interest rates.
zero-coupon bond with a par value
of $1,000 and 21 years to maturity. The yield to maturity on this
bond is 4.3 percent. Assume
semiannual compounding periods. How much price you are willing to
pay for this bond?
6. Treasury bills are currently paying 5 percent and the inflation
rate is 2.5 percent.
a. What is the approximate real rate of interest?
b. What is the exact real rate?
7. Suppose the real rate is 3.8 percent and the inflation rate is
5.4 percent. What rate would you
expect to see on a Treasury bill?
8. How does interest rate impact both personal and corporate
decision making?
9. How can you tell whether a bond should sell at par, discount, or
premium by looking at coupon
rate and YTM?
10. Differentiate nominal and real interest rates.