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发表于 2011-3-30 15:40 | 只看该作者

Reading 66: Yield Measures, Spot Rates, and Forward Rates-LOS

2011, face, equivalent, interpret, center

Session 16: Fixed Income: Analysis and Valuation
Reading 66: Yield Measures, Spot Rates, and Forward Rates

LOS d: Calculate and interpret the bond equivalent yield of an annual-pay bond and the annual-pay yield of a semiannual-pay bond.

Consider a 6-year $1,000 par bond priced at $1,011. The coupon rate is 7.5% paid semiannually. Six-year bonds with comparable credit quality have a yield to maturity (YTM) of 6%. Should an investor purchase this bond?

A)	Yes, the bond is undervalued by $38.

B)	Yes, the bond is undervalued by $64.

C)	No, the bond is overvalued by $64.

FV = 1,000
PMT = 37.5
N = 12
I/Y = 3%
CPT PV = 1,074.66
1,074.66 – 1,011 = 64

. Reading 7: Statistical Concepts and Market Returns-LOS i 习题

. Reading 71: Option Markets and Contracts-LOS k 习题精选

. Reading 71: Option Markets and Contracts-LOS h 习题精选

. Reading 67: Introduction to the Measurement of Interest Rate

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发表于 2011-3-30 15:41 | 只看该作者

Sysco Foods has a 10-year bond outstanding with an annual coupon of 6.5%. If the bond is currently priced at $1,089.25, which of the following is closest to the bond-equivalent yield of the bond?

5.33%.

5.42%.

5.26%.

First, find the annual yield to maturity of the bond as: FV = $1,000; PMT = $65; N = 10; PV = –1,089.25; CPT → I/Y = 5.33%. Then, find the BEY as: 2 × [(1 + YTM)^0.5 – 1] = 0.0526 = 5.26%.

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发表于 2011-3-30 15:41 | 只看该作者

What is the semiannual-pay bond equivalent yield on an annual-pay bond with a yield to maturity of 12.51%?

12.14%.

12.00%.

12.51%.

The semiannual-pay bond equivalent yield of an annual-pay bond = 2 × [(1 + yield to maturity on the annual-pay bond)^0.5 – 1] = 12.14%.

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发表于 2011-3-30 15:41 | 只看该作者

The yield to maturity for a semiannual-pay, 10-year corporate bond is 5.25%. What is the bond's annual equivalent yield?

5.00%.

5.32%.

5.25%.

The annual equivalent yield is equal to [1 + (nominal yield/number of payments per year)]^{number of payments per year} – 1 = (1 + 0.0525/2)² - 1 = 5.32%.

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