Essay on Finc 5000 Homework Assignment for Week 3:

667 Words Jul 2nd, 2016 3 Pages
FINC 5000 Homework Assignment for Week 3:

Click Link Below To Buy: http://hwcampus.com/shop/finc-5000-homework-assignment-for-week-3/ Chapter 5:
For Week 3, please turn in the answers to the following questions:
1. Define the following terms as they apply to bonds:
a. Face value
b. Maturity date
c. Coupon interest (including coupon interest rate)
d. Current yield
e. Yield to maturity (YTM)
f. Yield to call (YTC)
g. Call premium
2. What are “Zero-coupon” bonds?
3. Suppose you see the following bond price quote in the newspaper:
McDonalds 5.7% 2039……..122.733
What can you tell about this bond from reading the price quote?
4. (calculating the present value of a bond) If a corporate bond with a face value of $1,000 has
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9. (calculating the YTM of a bond with semiannual interest payments) If a corporate bond with a face value of $1,000 has 24 years to go until it matures, has a coupon interest rate of 5.7%, paid semiannually, and has a market price of $1,223.92, what is its yield to maturity (YTM)?
10. Define the following terms as they apply to interest rates:
a. The real risk-free rate (r*)
b. The nominal risk-free rate (Rrf)
c. The inflation premium (IP)
d. The default risk premium (DRP)
e. The liquidity premium (LP)
f. The maturity risk premium (MRP)
11. Assume the real risk-free rate is 1%. Assume also that inflation is expected to be 1% in the coming year (year 1), 2% in the next year after that (year 2), and 3% in the year after that (year 3). Assume also that the default risk premium, the liquidity premium, and the maturity risk premium are 0%. Given these conditions, what would be the yield on three-year treasury bonds today?
12. Suppose the First Bank of St Louis was offering the following rates on certificates of deposit (CDs) this week:
MaturityRate
3 month 1.50%
6 month 1.75%
1 year 2.00%
2 year 2.25%
3 year 2.50%
5 year 2.75%
10 year 3.00%
20 year 3.15%
a. Plot the above data on a yield curve. Label the graph and the axes appropriately.
b. Comment on the implications of this curve to you, as a potential investor in

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