1. An investor has two bonds in her portfolio, Bond C and Bond Z. Each bond matures in 4 years, has a face value of $1,000, and has a yield to maturity of 7.8%. Bond C pays a 10.75% annual coupon, while Bond Z is a zero coupon bond. Assuming that the yield to maturity of each bond remains at 7.8% over the next 4 years, calculate the price of the bonds at each of the years to maturity in the table.

1. An investor has two bonds in her portfolio, Bond C and Bond Z. Each bond matures in 4 years, has a face value of $1,000, and has a yield to maturity of 7.8%. Bond C pays a 10.75% annual coupon, while Bond Z is a zero coupon bond. Assuming that the yield to maturity of each bond remains at 7.8% over the next 4 years, calculate the price of the bonds at each of the years to maturity in the table.

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

See similar textbooks

Similar questions

A $1,000 bond has a coupon of 4 percent and matures after tên years. ASsume that the bond pays interest annually. a. What would be the bond's price if comparable debt yields 6 percent? Use Appendix B and Appendix D to answer the question. Round your answer to the nearest dollar. $ b. What would be the price if comparable debt yields 6 percent and the bond matures after five years? Use Appendix B and Appendix D to answer the question. Round your answer to the nearest dollar. c. Why are the prices different in a and b? The price of the bond in a is -Select- v than the price of the bond in b as the principal payment of the bond in a is -Select- v than the principal payment of the bond in b (in time). d. What are the current yields and the yields to maturity in a and b? Round your answers to two decimal places. The bond matures after ten years: CY: % YTM: % The bond matures after five years: CY: YTM:
Mr.Bond has a coupon rate of 5% (interest paid annually) and maturity of 6 years. If the current price of bond is $820.56, calculate the yield to maturity of the bond.
What is the expected capital gains yield for each bond in each year? Round your answers to two decimal places. See attached format Bond A has a 9% annual coupon, matures in 12 years, and has a $1,000 face value. Bond B has a 10% annual coupon, matures in 12 years, and has a $1,000 face value. Bond C has an 8% annual coupon, matures in 12 years, and has a $1,000 face value. Each bond has a yield to maturity of 9%.
A bond has just been issued. The bond has an annual coupon rate of 7% and coupons are paid annually. The bond has a face value of $1,000 and will mature in 7 years. The bond’s yield to maturity is 9%. Calculate the actual change in the bond’s price as the yield to maturity changes from 9% to 11%. Use the bond’s duration to calculate the approximate bond price change as the yield to maturity changes from 9% to 11%.
Assume that a bond will make payments every six months as shown on the following timeline (using six- month periods): Period 0 Cash Flows $20.87 a. What is the maturity of the bond (in years)? b. What is the coupon rate (as a percentage)? c. What is the face value? 2 $20.87 *** a. What is the maturity of the bond (in years)? The maturity is years. (Round to the nearest integer.) 39 $20.87 40 $20.87 + $1,000
A bond has just been issued. The bond has an annual coupon rate of 4% and coupons are paid annually. The bond has a face value of $1,000 and will mature in 8 years. The bond’s yield to maturity is 8%. Create a table to demonstrate the impact of the coupon rate and the time to maturity on the bond’s duration using: Coupon Rates of 0%, 4%, 8%, and 12%. Maturities of 4 years, 8 years, and 12 years.
Consider a 5-year coupon bond with a face value of $1,000. The bond matures five years from today and pays a coupon of 5% per annum. It has a YTM of 5% at time 0, a YTM of 6% at time 1, a YTM of 8% at time two and a YTM of 10% for time 3 and 4 and 30% at time 5. Assume the investor who owns this bond reinvests the coupons every year at the prevailing rate, and the yield curve is flat through the bond's life. Cashflows are paid annually.What is the annualized rate of return of this investor? Group of answer choices 4.12% 5.0% 1.5 5.39% 8.12% 10.0%
Suppose an investor has a 5-year investment horizon. He purchased an 8-year paying an 8% annual coupon rate while the bond's initial annual yield to maturity is 6%. The bond makes coupon payments semi-annually. The investor expects that he can reinvest the coupon at an annual interest rate of 7%. At the beginning of year 6, he expects the then yield to maturity to be 7%. What is the total return for this bond?
Consider a bond selling at its par value of $1000. The coupon rate is 6% and 5 years to maturity. Consider annual interest payments, calculate the bond's duration.

Recommended textbooks for you

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

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

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

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

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

SEE MORE TEXTBOOKS