Miss Natalia

(14)

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About Miss Natalia

Levels Tought:
Elementary,High School,College,University

Expertise:
Accounting,Business & Finance See all
Accounting,Business & Finance,Calculus,Computer Science,Environmental science,Health & Medical Hide all
Teaching Since: Apr 2017
Last Sign in: 359 Weeks Ago, 5 Days Ago
Questions Answered: 6064
Tutorials Posted: 6070

Education

  • Doctor of Education in Educational Leadership with a Specialization in Educational Technology
    Phoniex University
    Oct-1999 - Nov-2005

Experience

  • HR Executive
    a21, Inc.
    Nov-1998 - Dec-2005

Category > Business & Finance Posted 17 May 2017 My Price 10.00

Explain why zero-coupon bonds are considered more risky than coupon bonds

Suppose that the borrowing rate that your client faces is 2%. Assume that the S&P500 index has an

expected return of 3% and standard deviation of 15%, that the risk-free rate is 1%.

(a) Explain what a bond is, in particular why it is a fixed income security. Explain how to price

them.

(b) Explain why zero-coupon bonds are considered more risky than coupon bonds.

6(c) In the following figure, draw the change in bond prices when the interest rate changes, for the

following bonds (clearly mark which graph refers to which bond):

• Bond A: Copuon rate 12%, Maturity 5 years, initial yield-to-maturity: 10%

• Bond B: Copuon rate 12%, Maturity 30 years, initial yield-to-maturity: 10%

• Bond C: Copuon rate 3%, Maturity 30 years, initial yield-to-maturity: 10%

• Bond D: Copuon rate 3%, Maturity 30 years, initial yield-to-maturity: 6%

Answers

Miss Natalia
(14)
Status NEW Posted 17 May 2017 03:05 AM My Price 10.00

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