Bond pricing and yield to maturity

Bond pricing and yield to maturity

1. 1. A bond's coupon rate is 5% and its YTM is 7%. The bond is trading at:

   A premium (P > F)Par (P = F)A discount (P < F)Cannot tell without knowing maturity

2. 2. A 5-year bond with face value $1,000, 6% annual coupon, YTM 5%. What is its price? Answer in dollars to the nearest cent.

   $

3. 3. A 10-year bond has modified duration of 7.5. If yields jump 50 bps (from 5.0% to 5.5%), approximately what happens to price?

   Falls about 0.4%Falls about 3.75%Rises about 3.75%Falls about 7.5%

4. 4. Why was interest-rate risk such a problem for Silicon Valley Bank in 2023?

   They had short-duration assets and long-duration liabilitiesThey had long-duration assets that lost mark-to-market value when yields spiked in 2022-2023, eroding their capital baseThey held no Treasuries at allTheir assets and liabilities were perfectly matched