137. A life insurance company invests two million in a 10-year zero-coupon bond and four million in a 30-year zero-coupon bond. The annual effective yield rate for both bonds is 8%. (1+0.08) When the 10-year bond matures, the company reinvests the proceeds in another 10-year zero- coupon bond. At that time the bond yield rate is 12% annual effective. After 20 years from the initial investment, the 30-year bond is sold to yield an annual effective rate of 10% to the buyer. The maturity of the second 10-year bond and the sale of the 30-year bond result in a gain of X on the company's initial investment of six million. 14317849-995 Calculate X. ١٥ | وه

137. A life insurance company invests two million in a 10-year zero-coupon bond and four million in a 30-year zero-coupon bond. The annual effective yield rate for both bonds is 8%. (1+0.08) When the 10-year bond matures, the company reinvests the proceeds in another 10-year zero- coupon bond. At that time the bond yield rate is 12% annual effective. After 20 years from the initial investment, the 30-year bond is sold to yield an annual effective rate of 10% to the buyer. The maturity of the second 10-year bond and the sale of the 30-year bond result in a gain of X on the company's initial investment of six million. 14317849-995 Calculate X. ١٥ | وه

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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14. Hamilton Corporation's bonds will mature in 15 years. The bonds have a face value of $1,000 and an 8% coupon rate, paid semiannually. The price of the bonds is $1,111.14. What is the yield to maturity of the Hamilton bonds?
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.
suppose a company issues $10,000 face value discount bond maturing in one year What's the price of this bond if its yield to maturity of 5 percent?
Ten bonds are purchased for $9,598.13 and are kept for 5 years. The bond coupon rate is 7% per year, payable semiannually. Immediately following the owner's receipt of the last coupon payment, the owner sells each bond for $50 less than its par value (price discount). The owner will invest in the bonds if the effective annual yield is at least 9%.What is the face value of each bond?______
YMMV Inc. issues a 6 year bond with a 7.000% coupon and a $5,000,000.00 face value. The yield rate on the bond is 9.250% compounded monthly. They will set up a sinking fund with monthly deposits and an interest rate r(2) = 6.000%. a) How much are the monthly deposits into the sinking fund? b) YMMV defaults on the bond at the end of year 2 . What is the price of the bond at the time they default? c) How much is in the sinking fund at the time of default? How much money do the bondholders end up losing?
A 10-year, 12.00%, $5,000 bond that pays dividends quarterly can be purchased for $4,456. This means that $4,456 is spent on the bond now. Every quarter, $150.00 is provided to the purchaser as the dividend. After 10 years, $5,000 is given to the purchaser. If the bond is purchased and pays as scheduled, which of the following ranges of effective rate of return will the purchaser receive? 12.00% 12.50% - 12.50% 13.75% - 14.00% - 15.00% - 15.01% 17.01%
44
10. A firm has an issue of $1,000 par value bonds with a 12 percent stated interest rate outstanding. The issue pays interest annually and has 10 years remaining to its maturity date. If bonds of similar risk are currently earning 8 percent, the firm's bond will sell for today.
IMS corporation bonds have a coupon rate of 12% paid annually and 15 years to maturity. If the market rate of interest is 10%, the bonds should sell for: $863.78 $1,000.00 $1,152.12 $1,726.58
Ten bonds are purchased for $9,083.25 and are kept for 5 years. The bond coupon rate is 5% per year, payable annually. Immediately following the owner's receipt of the last coupon payment, the owner sells each bond for $50 less than its par value (price discount). The owner will invest in the bonds if the effective annual yield is at least 7%. What is the face value of the the ten bonds?
Your company has bonds that mature in 12 years and have a face value of $1,000. The bonds have an 8 percent semi-annual coupon (pays $40 every six months). The bonds may be called in five years. The bonds have a YTM of 7 percent and a yield-to-call of 8.62 percent. Determine the bonds' call price. O $1,100 O $1,080 O $1,160 O $1,140 O $1,120
8. A bond is offered for sale for $1,120. Its face value is $1,000 and the interest is 11% payable annually. What yield to maturity will be received if the bond matures 10 years hence?

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