Homework #4F (Bond Yield to Call. YTM and Price after original Issue)

the following features: • Coupon rate of interest (paid annually): 10 percent • Principal: $1,000 • Term to maturity: 8 years a. What will the holder receive when the bond matures? |-Select- b. If the current rate of interest on comparable debt is 7 percent, what should be the price of this bond? Assume that the bond pays interest annually. Use Appendix B and Appendix D to answer the question. Round your answer to the nearest dollar. Would you expect the firm to call this bond? Why? -Select- v, since the bond is selling for a-Select- v. c. If the bond has a sinking fund that requires the firm to set aside annually with a trustee sufficient funds to retire the entire issue at maturity, how much must the firm remit each year for eight years if the funds earn 7 percent annually and there is $80 million outstanding? Use Appendix C to answer the question. Round your answer to the nearest dollar.

What is the value of a bond that has a par value of $1,000, a coupon of $120 (annually), and matures in 10 years? Assume a required rate of return of .0702. Instruction: Type your answer in dollars, and round to two decimal places.

Suppose that you buy a two-year 8.9% bond at its face value.   a-1. What will be your total nominal return over the two years if inflation is 3.9% in the first year and 5.9% in the second? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)           a-2. What will be your total real return? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)           b. Now suppose that the bond is a TIPS. What will be your total 2-year real and nominal returns? (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places.)

What is the last payment amount of a bond with 1 payment per years, Coupon Rate 8.50% and principal and $514,000 principal and matures in 10 years? Answer with two decimal digits accuracy. Example: 631062.50

What is the value of a bond that matures in 17 years, makes an annual coupon payment of $50, and has a par value of $1,000? Assume a required rate of return of .0590. Instruction: Type your answer in dollars, and round to two decimal places

What is the approximate price of a bond that matures in two years (T= 2), with a face value of $1000 (F= $1000), and an annual coupon payment of $50 (C = $50), if the interest rate is 6 percent? $1056.67 $1100.00 $876.33 $981.67

Question 1?

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Question 1 : Consider a coupon bond with an 8% annual coupon rate, a 10% interest rate, and a $1000 face value. The bond will mature in 4 years. What is the duration of this bond? Duration is defined as a weighted average of the maturities of the cash payments. Suppose the weight assigned to the maturity of 1 year is W. Show your work. No work, no credit A: Duration 2.28 and W=7.77% B: Duration=3.56 and W-20.5% C. Duration 3.56 and W-23.1% D. Duration=3,56 and W-7.77%

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1. Consider a real return bond with a face value of $15,000 and a coupon yield of 5.2%. What is the coupon payment after one year if the inflation rate is 6.8%? Select one: a) $817.44 b) $833.04 c) $825.24 d) $809.64 I

3.  A 6-year Circular File bond pays interest of $80 annually and sells for $950. Par value is $1,000 by assumption.        a)What is its coupon rate? (Round your answer to 2 decimal places.)  b) What is its current yield? (Round your answer to 2 decimal places.)  c) What is its yield to maturity? (Round your answer to 4 decimal places.)

Please show working   Please answer ALL OF QUESTIONS 1 AND 2   1. A bond has a $1,000 par value, 10 years to maturity, and an 8% annual coupon and sells for $980. a. What is its yield to maturity (YTM)? Round your answer to two decimal places. ___________%    b. Assume that the yield to maturity remains constant for the next 3 years. What will the price be 3 years from today? Do not round intermediate calculations. Round your answer to the nearest cent.____________% 2. Assume that the risk-free rate is 6% and the required return on the market is 8%. What is the required rate of return on a stock with a beta of 1.5? Round your answer to two decimal places.

Bond Principal ($) Time to Maturity (yrs) 100 0.5 100 1.0 100 1.5 100 2.0 *Half the stated coupon is paid every six months Annual Coupon ($)* 0.0 0.0 6.2 8.0 Bond Price ($) 98 95 101 100 Calculate the 2-year par yield. Enter your answer rounded to four decimal places, skip the % sign. For example, if your calculation results in 0.1234567 %, you only need to enter 0.1235.

1. A three-year bond with a $1,000 face-value and 10% coupon rate is sold for $1,000 today (Year 1).  If one year later (Year 2) the market interest rate decreases by 5%, then this bond will have a market price of $ ____ (round UP to the nearest integer) next year (Year 2).   2. True or False? The current interest rate on a 10-year coupon bond with face value = $1,000 and annual coupon rate = 3.25% is2.42%.  This implies the buyer of the bond will receive a $24.2 payment from the bond issuer every year before maturity while holding the bond.   3. A three-year bond with $1,000 face-value and 10% coupon rate is sold for $1,000 today (YEAR 1).  If one year later (Year 2) the market interest rate increases by 5%, then this bond will have a market price of $ ________ (round UP to the nearest integer) then (Year 2).

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