2. Rick bought a 30-year bond when it was issued by Macroflex Corporation 8 years ago. The bond has a $1,000 face value and a coupon rate equal to 5 percent and the coupon is paid every six months. If the yield on similar-risk investments is 6 percent, a. What is the current market value (price) of the bond? b. Suppose interest rate levels rise to the point where such bonds now yield 8 percent. What would be the price of Macroflex bond? c. At what price would Macroflex bonds sell if the yield on them was 4 percent?
2. Rick bought a 30-year bond when it was issued by Macroflex Corporation 8 years ago. The bond has a $1,000 face value and a coupon rate equal to 5 percent and the coupon is paid every six months. If the yield on similar-risk investments is 6 percent, a. What is the current market value (price) of the bond? b. Suppose interest rate levels rise to the point where such bonds now yield 8 percent. What would be the price of Macroflex bond? c. At what price would Macroflex bonds sell if the yield on them was 4 percent?
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
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Transcribed Image Text:2. Rick bought a 30-year bond when it was issued by Macroflex Corporation 8 years ago. The bond
has a $1,000 face value and a coupon rate equal to 5 percent and the coupon is paid every six
months. If the yield on similar-risk investments is 6 percent,
What is the current market value (price) of the bond?
b. Suppose interest rate levels rise to the point where such bonds now yield 8 percent. What
would be the price of Macroflex bond?
c. At what price would Macroflex bonds sell if the yield on them was 4 percent?
d. What do you observe regarding the relationship between interest rate (YTM) bond's price?
What do you observe regarding the relationship between coupon, YTM and the bond's
price?
а.
е.
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