Question 14.21 A 30-year maturity, 8% coupon bond paying coupons semiannually is callable in 5 years at a call price of $1,100. The bond currently sells at a yield to maturity of 7% (3.5% per half-year).
a) What is the yield to call?
b) What is the yield to call if the call price is only $1,050?
c) What is the yield to call if the call price is $1,100, but the bond can be called in 2 years instead of 5 years?
Question 15.11 The yield to maturity on 1-year zero-coupon bonds is currently 7%; the YTM on 2-year zeros is 8%. The Treasury plans to issue a 2-year maturity coupon bond, paying coupons once per year with a coupon rate of 9%. The face value of the bond is $ 100.
a. At what price will the bond sell?
b. What will the yield to maturity on the bond be?
c. If the expectations theory of the yield curve is correct, what is the market expectation of the price that the bond will sell for next year?
d. Recalculate your answer to (c) if you believe in the liquidity preference theory and you believe that the liquidity premium is 1%.
Question 15.13 In addition to the zero-coupon bond, investors also may purchase a 3-year bond making annual payments of $ 45 with par value $ 1,000.
a. What is the price of the coupon bond?
b. What is the yield to maturity of the coupon bond?
c. Under the expectations hypothesis, what is the expected realized compound yield of the coupon bond?
d. If you forecast that the yield curve in 1 year will be flat at 6.5%, what is your forecast for the expected rate of return on the coupon bond for the 1-year holding period?
Question 15 CFA 10 The spot rates of interest for five U.S. Treasury securities are shown in the following exhibit. Assume all securities pay interest annually.
a. Compute the 2-year implied forward rate for a deferred loan beginning in 3 years.
b. Compute the price of a 5-year annual-pay Treasury security with a coupon rate of 9% by using the information in the exhibit.
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