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I need help with this assignment, im not sure of the equations to use. Additional Requirements Min..
More:I need help with this assignment, im not sure of the equations to use. Additional Requirements Min Pages: 1 Max Pages: 2 Level of Detail: Show all work Document Preview: MOUNT SAINT VINCENT UNIVERSITY BUSI 3361(02) Winter 2014 Assignment #2 Due on Thursday, February 13, 2014 at 3:00p.m. (Due at the start of class….late assignments will not be accepted) Total Value 60 Marks Assume that the current yield curve shows that current market rates for bonds that pay semi annual coupons are as follows: the 6 month rate is 1%, the one year rate is 1.1%, and the one and a half year rate is 1.3%. These bonds all have an interest coupon that pays interest semi annually. What is the price of a $1000 par, 4% coupon maturing in one and half years (the next coupon is exactly 6 months from now)? Hint: the 6 month rate should be used to discount the first coupon which is paid in 6 months, the one year rate should be used to discount the second coupon which is paid in one year and the one and one half year rate should be used to discount the coupon paid in one and one half year. (6 Marks) Suppose a 10 year $1000 bond with an 8% coupon rate and semi annual coupons is trading for a price of $1034.74. What is the bond’s yield to maturity (expressed as an APR with semi annual compounding)? (4 Marks) If the bond’s yield to maturity changes to 9% APR, what will the bond’s price be? (4 Marks) The prices of several bonds with face values of $1000 are summarized below: Bond A B C D Price $972.50 $1040.75 $1150.00 $1000.00 For each bond, state whether it trades at a discount, at par, or at a premium. (4 Marks) You have purchased a 10% coupon bond for $1040. What will happen to the bond’s price if market interest rates rise. (2 Marks) Suppose a 7 year $1000 bond with a 8% coupon rate and semi annual coupon, is trading with a yield to maturity of 6.75%. Is this bond currently trading at a discount, at par, or at a premium? Explain. (2 Marks) If the yield to maturity of the bond rises to 7% (APR with semi annual compounding), what price will the bond trade for? (4 Marks) Anle Corporation has a current stock price of $20 and is expected...
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