🏷️ LIMITED TIME OFFER: GET 20% OFF GRADE+ YEARLY SUBSCRIPTION →
Log in
HomeStudy Guides420,000US230,000

FIN 3509 Study Guide - Final Guide: Spot Contract

56 views3 pages
School
Temple University
Department
Finance
Course
FIN 3509
Professor
John Katkish

For unlimited access to Study Guides, a Grade+ subscription is required.

Document Summary

Coupons are paid semiannually, so the 3% rate is an annualized, semi- annually compounded rate. Matching it to the ytm means the bond sells at par. b-e all sell above par: compared to the bond in (a), this bond has a lower yield to maturity, since 3% semi-annually compounded > 3% annually compounded. Since the actually coupon is higher, it is more valuable than par: the price is listed in the question it is above par, a. The duration of a zero-coupon bond is the time to maturity: 2 years: the change in yield is . 005 (. 5% is the increase from 2% to 2. 5%). You could add a convexity adjustment (c = 4) or calculate the ytm directly since it is the same as the spot rate. These will yield very similar results: a. You have an output that sells at . 85/lb. You have an input that costs . 95/lb and processing costs of sh. 80/lb.

Get access

Grade+20% off
$8 USD/m$10 USD/m
Billed $96 USD annually
Grade+
Homework Help
Study Guides
Textbook Solutions
Class Notes
Textbook Notes
Booster Class
40 Verified Answers

Related Documents

FIN 3509
Final Exam
Study Guide
FIN 3509 Study Guide - Midterm Guide: Dividend Yield, Spot Contract, Yield Curve
ultramarineporpoise492
FIN 3509
Final Exam
Study Guide
FIN 3509 Study Guide - Midterm Guide: Amortization Schedule, Net Present Value, Income Approach
emeraldhornet846
FIN 3509
Final Exam
Study Guide
FIN 3509 Study Guide - Final Guide: Mortgage Loan, Government National Mortgage Association, Construction Loan
emeraldhornet846

Related Questions

Consider a bond with a face value F a maturity of T years and a coupon rate p%, coupons paid semi annually, with price P.

a) Define the yield to maturity of the bond

b) What does it mean that the bond sells "at parity" (or "at par")

c) Explain why the bond sells at parity when the coupon rate equals the yield to maturity

Problem 24-12

Boeing Corporation has just issued a callable (at par) three-year, 5% coupon bond with semi-annual coupon payments. The bond can be called at par in two years or anytime thereafter on a coupon payment date. It has a price of $99. What is the bond’s yield to maturity and yield to call?

Coupon Rate %5.00
Payment Frequency semi-annually
Time until first call date (years) 2
Term of bond (years) 3
Call Price $100.00
Current Price $99.00
Coupon Payment
Yield to Call
Yield to Maturity

What is the price of a bond that has a yield to maturity of 10%, a $1,000 par value, 9 years to maturity, and a coupon rate of 8%, paid semi annually? Thank you!