A corporate bond has a 10-year maturity and pays interest semiannually. The quoted coupon rate is 6%, and the bond is priced at par. The bond is callable in 4 years at 112% of par. What is the bond’s yield to call?

Fixed Income Immunization: Duration and Convexity Matching A pension fund must make a liability payment of $[liability] in [horizon] years. The fund currently holds a bond portfolio whose duration and convexity have been matched to those of the liability. The manager wants to estimate the effect of a large interest-rate shock immediately after the portfolio is purchased. Input Value Current Portfolio Value $[pv] Modified Duration [moddur] Convexity [conv] Interest-Rate Shock [dy]% Question: Using the duration-convexity approximation, estimate the new value of the portfolio immediately after the interest-rate change. Use: ΔP/P ≈ −MD·Δy + ½·Conv·(Δy)2 Enter the estimated new portfolio value in dollars. Round to the nearest dollar.

Fixed Income Trading: Accrued Interest A bond trader is reviewing a client purchase of a corporate bond. The bond pays coupons semiannually, and the buyer must compensate the seller for the interest earned since the last coupon payment. Bond Input Value Face Value $1,000 Quoted Price [quote] Annual Coupon Rate [coupon]% Days Since Last Coupon Payment [days] Days in Coupon Period 182 Question: How much accrued interest must the buyer pay the seller? Assume semiannual coupon payments and 182 days between coupon payments. Round your answer to the nearest two decimals. Do not include the dollar sign.  

Fixed Income Immunization: Duration Matching A pension fund manager has a single future obligation and wants to immunize the liability using a bond portfolio. The fund must make a payment of $[liability] in 10 years. The current yield curve is flat at 6.00%. The manager is considering buying a duration-matched bond today and then holding it for 10 years. Input Value Future Liability $[liability] Liability Due Date 10 years from today Current Yield to Maturity 6.00% Bond Coupon Rate 7.00% Bond Maturity 15 years Face Value Used for Pricing $1,000 New Yield Immediately After Purchase [newytm]% Question: If interest rates immediately change to [newytm]%, what is the estimated terminal value of the duration-matched bond position after 10 years? The terminal value includes both the future value of reinvested coupons and the price of the remaining bond at year 10. Type your answer in dollars. Round to the nearest dollar.

A coupon bond that pays interest of 5% annually has a par value of $1,000, matures in 8 years, and is selling today at $785. The actual yield to maturity on this bond

You buy a TIPS at issue at par for $1,000. The bond has a [coupon]% coupon. Inflation turns out to be [i1]%, [i2]%, and [i3]% over the next 3 years. The total annual coupon income you will receive in year 3 is ______________. Please note this question refers to monetary (cash) income, not the rate. (i.e. $48.00) Please round to the nearest two decimals. Please do not include the $ symbol.

Fixed Income Trading: Dirty Price of a Bond An investment advisor is helping a client purchase a corporate bond in the secondary market. The bond pays coupons semiannually, and the seller is entitled to receive accrued interest for the portion of the coupon period that has already elapsed. The quoted price represents the clean price of the bond. To determine the amount that must actually be paid to acquire the bond, the investor must add accrued interest to the quoted price. Bond Input Value Face Value $1,000 Quoted (Clean) Price [quote] Annual Coupon Rate [coupon]% Days Since Last Coupon Payment [days] Days in Coupon Period 182 Question: What is the total amount that the investor should be willing to pay for the bond (i.e., the dirty price)? Remember that: Quoted price = Clean price Dirty price = Clean price + Accrued interest Assume semiannual coupon payments and 182 days between coupon payments. Round your answer to the nearest two decimals. Do not include the dollar sign.  

Fixed Income Risk: Modified Duration A fixed-income analyst is reviewing a semiannual coupon bond held in an institutional portfolio. The portfolio manager already understands the timing of the bond’s cash flows, but now wants to estimate the bond’s modified duration, which approximates the bond’s percentage price sensitivity to changes in yield. Bond Input Value Maturity [n] years Annual Coupon Rate [coupon]% Yield to Maturity [ytm]% Face Value $1,000 Coupon Frequency Semiannual Question: What is the bond’s modified duration? First compute Macaulay duration using the present value of the bond’s future cash flows. Then convert it to modified duration using the semiannual yield. Type your answer in years. Round to the nearest two decimals.

A corporate bond has a 10-year maturity and pays interest semiannually. The quoted coupon rate is 6%, and the bond is priced at par. The bond is callable in 5 years at 112% of par. What is the bond’s yield to call?

You buy a TIPS at issue at par for $1,000. The bond has a [coupon]% coupon. Inflation turns out to be [i1]%, [i2]%, [i3]%, and [i4]% over the next 4 years. The total annual coupon income you will receive in year 4 is ______________. Please note this question refers to monetary (cash) income, not the rate. (i.e. $48.00) Please round to the nearest two decimals. Please do not include the $ symbol.