Two amortizing bonds have the same maturity date and same yield to maturity. The rein

A.0.07%

B.2.6%

C.93.0%

D.The default correlation cannot be calculated with the information provided.

estor’s objective is to find bonds with cash flows that will precisely match a known stream of future obligations. Which of the following two issues willmost likely to meet the investor’s objective？

A. A putable bond and a floating-rate bond.

B. A mortgage-backed security and a convertible bond.

C. A zero-coupon bond and a Treasury strip.

An analyst is evaluating the two bonds below:

Compared with Bond A, Bond B most likely will have:

A.less interest rate risk and more reinvestment risk.

B.more interest rate risk and less reinvestment risk.

C.less interest rate risk and less reinvestment risk.

A.both bonds will increase in value, but bond F will increase more than bond G

B.both bonds will increase in value, but bond G will increase more than bond F

C.both bonds will decrease in value, but bond F will decrease more than bond G

D.both bonds will decrease in value, but bond G will decrease more than bond F

E.none of the above

0% coupon paid semi-annually and a face value of $10,000, maturing in two years. Using the effective interest method, calculate the amount of interest expense associated with the Class H bonds reported by Bao for the period ending 12/31/x3.

A. $405.

B. $808.

C. $1,000.

lines more than the price of Bond B.Compared to Bond B, Bond A most likely:

A.is callable.

B.has a lower coupon.

C.has a shorter maturity.

ives its owner the right to convert the bond to a fixed number of shares of the issuer’s common stock. The convertibility option in the second bond cannot be exercised for five years. The bonds are otherwise identical. Compared with the yield on the convertible bond, the yield on the bond with the embedded option is most likely:

A. lower.

B. the same.

C. higher.

Section B – TWO questions ONLY to be attempted

GNT Co is considering an investment in one of two corporate bonds. Both bonds have a par value of $1,000 and pay coupon interest on an annual basis. The market price of the first bond is $1,079？68. Its coupon rate is 6% and it is due to be redeemed at par in five years. The second bond is about to be issued with a coupon rate of 4% and will also be redeemable at par in five years. Both bonds are expected to have the same gross redemption yields (yields to maturity).

GNT Co considers duration of the bond to be a key factor when making decisions on which bond to invest.

Required:

(a) Estimate the Macaulay duration of the two bonds GNT Co is considering for investment. (9 marks)

(b) Discuss how useful duration is as a measure of the sensitivity of a bond price to changes in interest rates. (8 marks)

On June 30, Sally receives the $800 annual interest payment on the bonds. How much income should Sally recognize due to these two events？()

A、$0

B、$200

C、$800

D、$20,000

E、$20,800

first issue has 15 years to maturity and an annual coupon of 6%. The second issue has the same yield to maturity as the first one, pays annual interest as well, but has only 5 years remaining till maturity. The annual interest payment on the second issue is closest to:

A. $25.23.

B. $27.83.

C. $29.46.