Zero-coupon bond with the yield-to-maturity

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a) What is the value of a 30-year zero-coupon bond with a yield-to-maturity of 8% with a face value of $1,000?

b) What is the duration of the 30-year zero-coupon bond with the yield-to-maturity of 8%?

c) What is the type of the risk that can be eliminated by diversification?

d) What is the effective interest rate for a $1,000 bond paying interest semi-annually with an APR of 10%?

e) A 3-year bond with a 10% coupon rate and $1000 face value yield-to-maturity of 8%. Assuming annual coupon payments, calculate the price of the bond.

A. $857.96

B. $951.96

C. $1000.00

D. $1051.54

f) A bond currently sells for $850. It has an 8-year remaining maturity, an annual coupon of $80, and a par value of $1,000. What is the current yield?

g) What is the standard deviation of a portfolio of securities with no risk?

h) Investments B and C both have the same standard deviation of 20% and have the same correlation to the market portfolio. If the expected return on B is 15% and the expected return on C is 18% the investors would:

A. Prefer B to C.

B. Prefer C to B.

C. Reject both B and C.

D. Cannot answer without knowing investor's risk preferences.

Reference no: EM131333934

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