Reference no: EM132240466
Bond Valuation and Interest Rates Questions -
Question 1 - Calculate the current price of the following $1000 FV bonds with 7 years to maturity:
a) BOND A: Market yield 6.5%, semi-annual coupon payments.
b) BOND B: Market yield 6.5%, annual coupon payments.
c) BOND C: Market yield 6.5%, zero coupon payments.
d) BOND D: Market yield 9.2%, semi-annual coupon payments.
e) BOND E: Market yield 9.2%, annual coupon payments.
f) BOND F: Market yield 9.2%, zero coupon payments.
g) Provide comments about your calculations - which bond would you prefer? Why?
Question 2 - Holly is planning a 6 month vacation to Europe in one-year. She has saved C$10,000 and has two options to invest her money:
Option 1 - Invest in a 1-year Canadian T-bill 3.5%
Option 2 - Invest in a 1-year Euro T-bill 4.5%
The current spot rate is C$1.4810/€ and the forward rate is C$1.4668/€. Which option should Holly choose?
If the Canadian T-bill yield increased to 4%, what would the forward C$/€ rate need to be to make Holly indifferent to her investment options?
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Calculate the current price
: Calculate the current price of the following $1000 FV bonds with 7 years to maturity: Market yield 6.5%, semi-annual coupon payments
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