18. Assume that a 15-year, $1,000 face value bond pays semi-annual interest of $30.00. If an investor requires(Market interest rate) a simple annual rate of return of 8 percent, how much should the investor be willing to pay for this bond? (Round the answer to two decimal places.) O $827.08 O $572.03 O $1,358.24 O $835.81 O $1,120.71

18. Assume that a 15-year, $1,000 face value bond pays semi-annual interest of $30.00. If an investor requires(Market interest rate) a simple annual rate of return of 8 percent, how much should the investor be willing to pay for this bond? (Round the answer to two decimal places.) O $827.08 O $572.03 O $1,358.24 O $835.81 O $1,120.71

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

Related questions

Q: The investor plans to invest 2000 UAH and chooses between two investment options: one-year bond that…

A: The effective interest rate, also known as the annual equivalent rate (AER) or annual percentage…

Q: A bond has a $1,000 face value, a market price of $996.29, and pays interest payments of $72.05…

A: In the given case, we have provided the face value or the par value of bond , market price of bond…

Q: 4. Suppose the U.S. Federal Reserve offers a bond for $635.20 at 8 years to maturity. You will not…

A: Maturity price = $ 950 Issue price = $ 635.20 Period = 8 Years

Q: What is the implicit (dollar) interest for the first year of an American Century bond currently…

A: in this we have to calculate interest rate considering present value and future value.

Q: How much is a bond worth if it pays $55 per year in interest forever and the market interest rate is…

A: In the given we require to calculate the bond worth from following details: Annual interest = $55…

Q: An investor purchases a 10-year, $5,000 face value bond that pays semiannual interest at annual rate…

A: Detailed explanation:1. Semiannual Coupon Rate Calculation:Semiannual Coupon Rate=210%=5% 2. Coupon…

Q: You're considering an investment in 10-year, $1,000 face value bonds that pay 8.50% annually and…

A: The yield to maturity of the bond is the rate of return that an investor earns on the investment in…

Q: Use the following tables to calculate the present value of a $774,000 @ 6%, 5-year bond that pays…

A: Lets understand the basics. For calculating present value of bond, we need to use below formula. =…

Q: The stated rate is 5%; the market rate is 4%. The future value of Bonds payable is $1,000. When…

A: Future value of bonds payable = $1000Stated rate = 5%Market rate = 4%

Q: Suppose an Exxon Corporation bond will pay $1,000 ten years from now. If the going interest rate on…

A: Present value = Future cash flow * (1 + Discount rate)^ Number of years

Q: Suppose an Exxon Corporation bond will pay $1,000 ten years from now. If the going interest rate on…

A: The objective of this question is to find the present value of a bond that will pay $1,000 ten years…

Q: What would you pay for a $205,000 debenture bond that matures in 15 years and pays $10,250 a year in…

A: Issue price of the bonds = Present value of principal + Present value of interest payments where,…

Q: A bond with 18 years to maturity has an annual interest payment of $30. If the bond sells for its…

A: Let the face value be $1000 therefore price of the bond =$1000 using excel rate function current…

Q: Assume that you just bought a 5-year bond that pays interest annually of $80 ead year and will…

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

Q: What would you pay for a $205,000 debenture bond that matures in 15 years and pays $10,250 a year in…

A: Issue price of the bonds = Present value of principal + Present value of interest payments where,…

Q: (Question 2, p.348) Suppose a bond with no expiration date has a face value of $10,000 and annually…

A: The corporation and government can raise finance by issuing bonds. The borrower i.e bond issuer is…

Q: 4. Today (at time t = 0) suppose that there is a 1-year zero-coupon bond with a price of $98.02 and…

A: A forward interest rate is a rate that is decided initially at today's price for a certain future…

Q: What is the market price of a $1,000, 8 percent bond if the market interest rates rise to 10 percent…

A: Time value of money :— According to this concept, value of money in present day is greater than the…

Q: What is the present value of a $500,000 12-year Bond with annual interest payments of $40,000…

A: Current value of a bond is that amount which is calculated with the help of future benefits from…

Q: mni.3

A: Approach to solving the question: Detailed explanation:To calculate the Macaulay duration and…

Q: How much would you pay for a $30,000, 4 year, 5% bond if I want a return of 7% { assume bond pays…

A: Given: Bond face value = $30,000 Coupon = 5% Semi annual coupon rate =2.5% So, semi annual coupon…

Question

18. Assume that a 15-year, $1,000 face value bond pays semi-annual interest of $30.00.
If an investor requires(Market interest rate) a simple annual rate of return of 8 percent,
how much should the investor be willing to pay for this bond? (Round the answer to
two decimal places.)
O $827.08
O $572.03
O $1,358.24
O $835.81
O $1,120.71

Expert Solution

This question has been solved!

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

This is a popular solution!

SEE SOLUTION Check out a sample Q&A here

Step 1

Step 2

Step 3

Step 4

Step 5

Trending now

This is a popular solution!

Step by step

Solved in 5 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, finance and related others by exploring similar questions and additional content below.

Similar questions

3) On August 6, 2023, the Bank of Mexico (BANXICO) placed bonds with a nominal value of 10 pesos for 120 days and at a simple discount rate of 3.57% annually. What was the rate of return obtained by bonds buyers? options: 5.32 8.74 1.05 3.61
V1
Suppose an Exxon Corporation bond will pay $1,000 ten years from now. If the going interest rate on safe 10-year bonds is 7.00%, how much is the bond worth today? O a. $483.98 b. $475.09 Oc. $508.35 Od. $502.57 O e. $543.93
2.
How much would you be prepared to pay for a $1,000 bond which comes due in 8 years and pays $100 interest annually assuming your required rate of return is 12% (pick closest answer)? a. $901 b. $1,032 c. $1,007 d. $962
If the market rate of interest is 10%, a $10,000, 12%, 10-year bond that pays interest semiannually would sell at an amount ☐ a. equal to the face value b. greater than face value c. that cannot be determined d. less than face value
Use the following tables to calculate the present value of a $608,000 @ 6%, 6-year bond that pays $36,480 interest annually, if the market rate of interest is 7%. Round to the nearest dollar. Present Value of $1 ¦ Present Value of Annuity of $1 Periods 5 % 6 % 7 % 10 % ¦ Periods 5 % 6 % 7 % 10 % 1 .95238 .94340 .93458 .90909 ¦ 1 .95238 .94340 .93458 .90909 2 .90703 .89000 .87344 .82645 ¦ 2 1.85941 1.83339 1.80802 1.73554 3 .86384 .83962 .81630 .75131 ¦ 3 2.72325 2.67301 2.62432 2.48685 4 .82270 .79209 .76290 .68301 ¦ 4 3.54595 3.46511 3.38721 3.16987 5 .78353 .74726 .71299 .62092 ¦ 5 4.32948 4.21236 4.10020 3.79079 6 .74622 .70496 .66634 .56447 ¦ 6 5.07569 4.91732 4.76654 4.35526 7 .71068 .66506 .62275 .51316 ¦ 7 5.78637 5.58238 5.38929 4.86842 8 .67684 .62741 .58201 .46651 ¦ 8 6.46321…
An investor wants to find the duration of a(n) 15-year, 6% semiannual pay, noncallable bond that's currently priced in the market at $587.05, to yield 12%. Using a 150 basis point change in yield, find the effective duration of this bond (Hint: use Equation 11.11). Question content area bottom Part 1 The new price of the bond if the market interest rate decreases by 150 basis points (or 1.5%) is $enter your response here. (Round to the nearest cent.)
The stated rate is 5%; the market rate is 4%. The future value of Bonds payable is $1,000. When calculating the PV of the bonds what amount would you use as the annuity or annual payment? $40 $10 E $50 $90 $100
If you initially pay $1000 for a bond with an annual interest then the market interest rate rises to 6% the market price of the bond is now A $1,000 B $943.40 C $1,006 D $1,000.05
How much should an investor be willing to pay now for 10%, P 50, 000.00 bond that will mature in 25 years and pays interest semi-annually, if it wants to make 12% nominal interest compounded semi-annually on a bond investment Given: Required: Solution: refer to this textbook: https://drive.google.com/file/d/1h4ra80IE8IRtYyja16iK6TtjCrTDi73j/view?usp=sharing
You have purchased a U.S. Treasury bond for $3,150.00. No payments will be made until the bond matures 10 years from now, at which time it will be redeemed for $5,150. What interest rate will you earn on this bond? Group of answer choices 6.18% 5.04% 3.73% 5.67% 4.46%

SEE MORE QUESTIONS

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