12. An OMR 100 bond with two years to maturity and anannual coupon of 9 per cent is available. (The nextcoupon is payable in one year.)a. If the market requires a yield to maturity of 9 per centfor a bond of this risk class what will be its marketprice? (1.5 marks)b. If the required yield to maturity on this type of bondchanges to 10 per cent, what will the market pricechange to? (1.5 marks)

The bond price is the present discounted value of the future cash stream generated by a bond. It…

Answered: 12. An OMR 100 bond with two years to…

12. An OMR 100 bond with two years to maturity and an annual coupon of 9 per cent is available. (The next coupon is payable in one year.)

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Related questions

Q: The 4-year bond with a nominal value of 1.000 TL pays coupons once a year. It is known that the…

A: Formula to calculate price of the bond is: Bond Price =C×1-1+r-nr+FV(1+r)nWhere,n =number of Period…

Q: A bond with a coupon rate of 8.5%, that pays coupons semi-annually, will make payments of how much…

A: Coupon Rate = 8.5%Payment = Semi-AnnuallyAnnual Coupon Payment = Coupon Rate x Face Value

Q: A bond has 5 years to its maturity .It was purchased for 50,000 TL and had a return 12% per year…

A: Computation of present worth of bond based on the yield:Coupon rate=50000Return=12% per annum…

Q: nsider a bond with a par value of $1,000. It pays a coupon of 10% (annual) and the coupon is paid…

A: Yield to maturity is the rate of return realized on the bond when the bond is held till maturity and…

Q: A bond matures in 12 yesrs has a $1000 par value. The annual interest rate is 13 percent. The…

A: Time period of bond = 12 years Par value = $1000 Coupon Rate = 13% Yield to maturity = 14%

Q: what is the principal amount to be repaid at the end of ten years? Show your work.

A: Price of the bond is the PV of all future coupons and par value discounted at the YTM. By…

Q: 6. An initial sum of $50,000 is invested in a bond. You will receive payments of $2,000…

A: a. Semi - Annual Interest Rate: Given: Investment amount = $50,000 Semi-Annual Interest received =…

Q: Consider a fixed-payment security that pays P100 at the end of every year fo the three years. If the…

A: Present value of bond can be calculated by using this equation Present value =C1/(1+r) +C2/(1+r)2…

Q: 3.2. The ARA Corporation bonds have a coupon of 14%, pay interest semiannually, and they will mature…

A: In the Given question we require to calculate the present value of the ARA corporation bond from the…

Q: The coupon bond with a face value of £10, pays a coupon of 5% per year, paid semi-annually. It has 3…

Q: Find the duration (in years) of a 4-year bond with the following characteristics: $10,000 face…

A: Macaulay duration refers to the timeframe that a bond investment requires to produce cash inflow…

Q: A 13-year bond is selling at $1,040 and its coupon is paid semi-annually. If the YTM is 9%, what is…

A: RATE/ YTM (9%/12) 4.50% PERIOD (13*2) 26 PRESENT VALUE $1,040 FACE VALUE (FV) 1000…

Q: A 12-year U.S. Treasury bond with a face value of $1,000 pays a coupon of 6.00% (3.000% of face…

A: Face value of the bond = $1,000 Coupon rate = 6% Semi annual coupon rate = 6%/2…

Q: A two-year amortizing bond has a coupon rate of 4% and pays its coupons semiannually. Coupon…

A: “Hi There, thanks for posting the question. But as per Q&A guidelines, we must answer the first…

Q: three-year coupon bond with 10%annual coupons is selling for $1,100. If you purchase this bond and…

A: Bonds are sources of income and finance for companies and bonds are quite safe and secured sources…

Q: A ten-year 100 face amount bond has an annual coupon rate of 8% payable semiannually. The bond is…

A: Bond price at an effective annual rate of 6% and different maturity of 5,7 and 9 years is…

Q: Bond C has a $1,000 face value and provides an 8% annual coupon for 30 years. The appropriate…

A: The current price of the value of the bond is equal to the PV of all the coupons payable plus the PV…

Q: Suppose a pure discount State of New York bond will pay $1,000 ten years from now. If the going…

A: A financial instrument that has a fixed income and also helps a company to raise funds for business…

Q: A bearer bond worth Rs. 50,000 after six years. What will be the present value of the bond if…

A: Bond is a debt instrument issued by companies and government. It is a fixed income instrument which…

Q: A 15 years bond with annual coupon rate equal to 10% (paid semiannually), if the par value of the…

A: A bond is considered as a fixed-income instrument. A bond represents the loan provided by the…

Q: A 5.60 percent coupon bond with 15 years left to maturity can be called in six years. The call…

A: I Periodic coupon amount 28 F Call price 1056 P Current market price/proceeds 1116.5 n…

Q: A ten-year USD100 par value bond pays 8% coupons semiannually. The bond is priced at USD118.20 to…

A: Bond value is the current price or the present value of the bond. This can be determined by…

Q: A 2-year bond has face value £600,000, quarterly coupons at rate 4% pe annum, and is redeemable at…

A: Bonds are a source of investment and finance and bonds are paid interest only payments and par value…

Q: Calculate the duration ( Macaulay ) of a 2 - year bond that pays 3 % coupon annually , has a YTM of…

A: Macaulay duration With periodic coupon payment (PMT), periodic yield (r), maturity period (n),…

Q: A five-year bond with a yield of 11.5% (continuously compounded) pays an 8.9% coupon at the end of…

A: Here,ParticularsValuesFace value of the bond (FV) $ 1,000.00Yield to Maturity 11.50%Coupon…

Q: rate on these 10-year bonds is 4.9%, how much is the a) with annual compounding

A: Given information : Expected amount to be paid $1,000.00 Time to be paid (years) 10 Interest…

Q: A company considers issuing a 5-year bond with a face value of $1,000 and annual coupon payments.…

A: Time = t = 5 years Face value = fv = $1000 Interest rate = r = 3% Present value of bond = pv =…

Q: A $1,000 par value bond with an annual 14% coupon rate will mature in 20 years. Coupon payments are…

A: Bonds: Bonds are a debt instrument on which interest is paid. They can be issued at a discount/par…

Q: 1. A bond, with a face value of P100,000 redeemable at par in 10 years, pays dividends at the rate…

A: A Bond with a face value of P100,000 redeemable at Par in 10 Years, pays dividend at the rate of 6%…

Q: A three-year bond is issued with a 9% coupon paid annually, and a maturity value of £100. If the…

A: Par value = £100 Coupon rate = 9% Coupon rate = 100*0.09= £9 Yield to maturity = 12% Years to…

Q: Consider a bond paying a coupon rate of 14.50% per year semiannually when the yield is 12.50%. The…

A: The objective of this question is to calculate the price of a bond today and four months from now.…

Q: The one-year interest rate over the next 10 years will be 1%, 2%, 3%, 4%, 5%, 6%, 7%, 8%, and 10%.…

A: One year interest rate over the next ten years will be as follows: 1st Year Interest = 1% 2nd Year…

Q: Consider a fixed-payment security that pays $250 at the end of every year for eight years. If the…

A: Present value = Amount to be received annually X Present value of annuity of $ 1 at 3% for 8 years

Q: A ten-year government bond makes annual coupon payments of 7% and offers a yield of 3% annually…

A: Bond is a debt instrument issued by companies and government. It is a fixed income instrument which…

Q: The interest rate on a 5-year Treasury bond is 3%. Investors expect that the one-year interest rate…

A: The calculation of term premium as follows: Working notes: The calculation of the average…

Q: annual yield rate is 8% convertible semiannually. Calculate the interest earned on this bond for the…

A: Calculate the semi-annual coupon payment. This is the amount of interest that the bondholder will…

Q: - A 10-year, P20,000 bond was issued at a nominal interest rate of 8% with semiannual compounding-…

A: The Price of the bond refers to the present value of the coupon cash flows and the maturity value.…

Q: A 8-year zero-coupon bond has an interest rate of 7.7%. What is it worth today?

A: Time = t = 8 years Interest rate = r = 7.7% Face value = fv = $1000

Concept explainers

Debenture Valuation

A debenture is a private and long-term debt instrument issued by financial, non-financial institutions, governments, or corporations. A debenture is classified as a type of bond, where the instrument carries a fixed rate of interest, commonly known as the ‘coupon rate.’ Debentures are documented in an indenture, clearly specifying the type of debenture, the rate and method of interest computation, and maturity date.

Note Valuation

It is the process to determine the value or worth of an asset, liability, debt of the company. It can be determined by many processes or techniques. Many factors can impact the valuation of an asset, liability, or the company, like:

Question

12. An OMR 100 bond with two years to maturity and an
annual coupon of 9 per cent is available. (The next
coupon is payable in one year.)
a. If the market requires a yield to maturity of 9 per cent
for a bond of this risk class what will be its market
price? (1.5 marks)
b. If the required yield to maturity on this type of bond
changes to 10 per cent, what will the market price
change to? (1.5 marks)

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

SEE SOLUTION Check out a sample Q&A here

Step 1

VIEW

Market Price if the required yield to maturity is 9%.

VIEW

Market Price if the required yield to maturity is 9%.

VIEW

Step by step

Solved in 3 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.

Similar questions

Calculate the duration of a $1000 10-year coupon bond with semiannual coupons paid at 6% per year with the interest rate 10%
A 8-year Oman government bond with a face value of OMR1,000 pays a coupon of 8% (4% of face value every six months). The reported yield to maturity is 10% (a six-month discount rate of 5%). What is the present value of the bond?
-If the interest rate on a one year bond is currently 12% and the interest rate on one year bond 12 months from now is expected to be 14%, what would be the interest on a two year bond today according to the Expectations Theory.
A 15-year bond with a coupon of Sx payable every 6 months has a face (and redemption) value of $10,000. At the nominal annual interest rate of 6.5% convertible semi-annually, the price of the bond is $9,000. Compute X.
The face value of a bond is $3000.00. The firm offering the bond pays 1% of the sales price to the selling agency and will pay $300.00 to the buyer every year. The bond matures in ten years and the firm pays $3000.00 to the buyer at the end of the tenth year. What is the effective rate of return on this bond to the firm offering it?
A bond promises to pay the bondholder equal payments of php 6000.00 in six month interval for 30 years. if the face amount is php 450000. What is the fair price of the bond ? Assume that market rate is 2% compounded annually?
7
A $1000 bond has 15 more years to maturity, an interest rate of 6%, and it pays interest semi-annually. If the current market interest rate is 5%, what is the price of the bond?
A 8-year Oman government bond with a face value of OMR1,000 pays a coupon of 8% (4% of face value every six months). The reported yield to maturity is 10% (a six-month discount rate of 5%). What is the present value of the bond?
A 2-year bond has face value £600,000, quarterly coupons at rate 4% per annum, and is redeemable at one-third par. a) What are each of the first seven payments? b) What is the eighth payment?
A 7.0 percent coupon bond with 25 years left to maturity can be called in four years. The call premium is one year of coupon payments. It is offered for sale at $1,066. What is the yield to call of the bond? (Assume that interest payments are paid annually and par value is $1,000.)