1. A $1,000, 12% semiannual bond is purchased at an arbitrary year, held 3 years (six interest payments), and redeemed at par value. What must the purchase price have been in order for the bond to be preferred over investing at 14% compounded semiannually? 2. If a $1,000, 12% quarterly bond is purchased for $1,020 and sold 3 years later for $950. What was the quarterly yield on the investment?

1. A $1,000, 12% semiannual bond is purchased at an arbitrary year, held 3 years (six interest payments), and redeemed at par value. What must the purchase price have been in order for the bond to be preferred over investing at 14% compounded semiannually? 2. If a $1,000, 12% quarterly bond is purchased for $1,020 and sold 3 years later for $950. What was the quarterly yield on the investment?

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Determine the price of a $1.9 million bond issue under each of the following independent assumptions: Maturity 10 years, interest paid annually, stated rate 6%, effective (market) rate 9%. Maturity 10 years, interest paid semiannually, stated rate 6%, effective (market) rate 9%. Maturity 10 years, interest paid semiannually, stated rate 9%, effective (market) rate 6%. Maturity 20 years, interest paid semiannually, stated rate 9%, effective (market) rate 6%. Maturity 20 years, interest paid semiannually, stated rate 9%, effective (market) rate 9%.
Colson Inc. issues 10-year bonds with a maturity value of $300,000. If the bonds are issued at a discount, this indicates that: Question 15 options: the contractual interest rate exceeds the market interest rate. the market interest rate exceeds the contractual interest rate. the contractual interest rate and the market interest rate are the same. no relationship exists between the two rates.
9. Sean Corp. issued a $40,000, 10-year bond, with a stated rate of 8%, paid semiannually. How much cash will the bond investors receive at the end of the first interest period? a.$1,600 b.$4,000 c.$3,200 d.$800
Requirement 1. Determine the present value of 10-year bonds payable with face value of $93,000 and stated interest rate of 12%, paid semiannually. The market rate of interest is 12% at issuance. (Round intermediary calculations and final answer to the nearest whole dollar.) 1. Determine the present value of 10-year bonds payable with face value of $93,000 and stated interest rate of 12%,paid semiannually. The market rate of interest is 12%at issuance. 2. Same bonds payable as in Requirement 1, but the market interest rate is 16%. 3. Same bonds payable as in Requirement 1, but the market interest rate is 8%.
(Bond relationship) Mason, Inc. has two bond issues outstanding, called Series A and Series B, both paying the same annual interest of $80. Series A has a maturity of 12 years, whereas Series B has a maturity of 1 year. a. What would be the value of each of these bonds when the going interest rate is (1) 6 percent, (2) 11 percent, and (3) 14 percent? Assume that there is only one more interest payment to be made on the Series B bonds. b. Why does the longer-term (12-year) bond fluctuate more when interest rates chavoe than does the shorter-term (1-vear) hond?
A bond matures in 20 years, at which time it pays the owner $1,000. It also pays $70 at the end of each of the next 20 years. If similar bonds are currently yielding 7%, what is the market value of the bond? Select one:cannot be determined from the information givenexactly $1,000under $1,000over $1,000
Kk.428.
Fitzgerald's 15-year bonds pay 6 percent interest annually on a $1,000 par value. If the bonds sell at $875, what is the bond's yield to maturity? What would be the yield to maturity if the bonds paid interest semiannually? Explain the difference.
Determine the price of a $1.3 million bond issue under each of the following independent assumptions: 1. Maturity 10 years, interest paid annually, stated rate 8%, effective (market) rate 10%. 2. Maturity 10 years, interest paid semiannually, stated rate 8%, effective (market) rate 10%. 3. Maturity 10 years, interest paid semiannually, stated rate 10%, effective (market) rate 8%. 4. Maturity 20 years, interest paid semiannually, stated rate 10%, effective (market) rate 8%. 5. Maturity 20 years, interest paid semiannually, stated rate 10%, effective (market) rate 10%. Note: Use tables, Excel, or a financial calculator. (FV of S1. PV of $1. EVA of $1. PVA of $1. EVAD of $1 and PVAD of $1.) Complete this question by entering your answers in the tabs below. Required 1 Required 3 Required 2 Required 4 Required 5 Maturity 10 years, interest paid annually, stated rate 8%, effective (market) rate 10%. Note: Round your answer to the nearest whole dollar. Price of bonds Required 2 > Next
Consider a newly issued 4-year, 3.11% annual-pay bond trading at par. The present values of each of the bond’s promised payments, discounted at 6.11%. Its Macaulay duration is closest to A. 3.625 years. B. 3.723 years. C. 3.811 years. D. 3.924 years.

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