13:18 M O MFnan301FinalExamFall2...ba1995f96f6315dff9f7g) If projects are mutually exclusive, which project would you accept? (5 points)i) at 5%ii) at 15%h) If projects are independent (not mutually exclusive), which project(s) would you accept? (4points)i) at 5%ii) at 15%3. A Macrohard Corp. bond carries an 8% coupon, paid annually and has 10 years to maturity. Thepar value is $1000 and the required rate of return is 5%.a) Calculate the price of the bond today (Po) (5 points)b) Is this a discount or premium bond? Explain? (5 points)c) Calculate the price of the bond one year from now (P1) (5 points)d) If you buy the bond today and sell it one year from now, calculate (10 points)i) Current yieldii) Capital gains yield 13:19 M O -Fnan301FinalExamFall2...ba1995f96f6315dff9f75ii) Capital gains yieldiii) Total rate of return (yield)4. Based on the following information CalculateState of Economy Probability of State of Economy Rate of Return if State OccursStock AStock BRecession0.200.05-0.17Normal0.550.080.12Вoom0.250.130.29a) The expected return of Stock A (7.5 points)b) The expected return of Stock B (7.5 points)c) The expected return of Portfolio where you invest $35,000 in Stock A and $45,000 in Stock B (5points)d) Suppose Stock A has a beta of 0.8 and Stock B has a beta of 1.3. If you invest $35,000 in Stock Aand $45,000 in Stock B, what is the beta of this portfolio? (5 points)e) Expected return on the market (RM) is 10% and the risk-free (rr) is 4%. What must the theexpected return on the portfolio according to CAPM? (Use the beta you have calculated in section d)for CAPM) (5 points)||

Information pertaining to part g and h is missing. Kindly refer below the solution of first three…

3. A Macrohard Corp. bond carries an 8% coupon, paid annually and has 10 years to maturity. The par value is $1000 and the required rate of return is 5%. a) Calculate the price of the bond today (Po) (5 points) b) Is this a discount or premium bond? Explain? (5 points) c) Calculate the price of the bond one year from now (P1) (5 points)

3. A Macrohard Corp. bond carries an 8% coupon, paid annually and has 10 years to maturity. The par value is $1000 and the required rate of return is 5%. a) Calculate the price of the bond today (Po) (5 points) b) Is this a discount or premium bond? Explain? (5 points) c) Calculate the price of the bond one year from now (P1) (5 points)

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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The price of a 5-year zero-coupon bond is A. The price of a 5-year floating rate bond with a coupon rate of 2*(r(t-1)) is B and the price of a 5-year 4% coupon bond is C. All bonds pay coupons (if appropriate) annually and the face value of all bonds is £150. What is the price of a 5-year inverse floating rate bond with a coupon of 12%-r(t-1) and a face value of £75. 2C-B-A 3C-0.5B-2A 2C-2B+A 3C-2B-2A
A bond has a 12% coupon rate. The coupon is paid semi-annually and the last coupon was paid 79 days ago. If the bond has a par value of $1,000, what is the accrued interest (assume a 364 day year)? Group of answer choices A. $20.44 B. $23.65 C. $26.04 D. $16.69 E. $22.49
2
4. A 5-year bond (denote this as Bond A) with semiannual coupons has a face value of $1,000 and a coupon rate of 6%. The bond is redeemable at 125% of the face value at maturity, and is currently selling for $1,015. Assume the next coupon is due six months from now. (a) Using linear interpolation with end points being 9% and 10%, approximate the bond's effective annual yield. (b) Another 5-year bond (denote this as Bond B) pays annual coupons and has the same face value, coupon rate, redemption value and yield as Bond A. Which bond has a larger duration? Explain your answer.
Give typing answer with explanation and conclusion A bond pays coupon rate of 5% with interest paid semi-annually. The price of the bond is $940 and the yield to maturity is 6.5%. The face value is $1,000. Estimate the number of years to maturity?
Suppose you want to purchase a bond with a $1,000 par value maturing in 4 years with an 8% annual coupon interest rate, and has a market interest rate of 6%. What’s the price or the value of this bond? Select one: a. $1,069.31 b. $1,000 c. $9712 d. 927.66
Consider two bonds, a 3-year bond paying annual coupons at 5% and a 10-year bond also paying annual coupons at 5%. Coupons are paid annually (not semiannually). Both are currently trading at par (i.e., price = face value). A. What must be the current discount rate for these bonds? B. Suppose that the discount rate for these bonds suddenly rise to 9%. What is the new price of the 3-year bond? What is the new price of the 10-year bond? C. Compare the price changes (i.e., the current price of $1,000 vs. the new bond price from Part B) of two bonds. Determine whether long-term or short-term bonds are more sensitive to interest rate fluctuation.
Consider a bond that is currently priced at $1100. If the face value of the bond is $1000, coupon payments are made semiannually, the bond matures in 5 years, and the YTM is 3%, what is the coupon rate? Group of answer choices 5.17% 2.58% 3.00% $25.84
A 5-year bond with 10% coupon rate and P1000 face value is selling for P1,054.30. Calculate the yield to maturity on the bond assuming annual interest payments. Use 5 decimal places in your computation Format: 1.11%
1. A three-year bond with a $1,000 face-value and 10% coupon rate is sold for $1,000 today (Year 1). If one year later (Year 2) the market interest rate decreases by 5%, then this bond will have a market price of $ ____ (round UP to the nearest integer) next year (Year 2). 2. True or False? The current interest rate on a 10-year coupon bond with face value = $1,000 and annual coupon rate = 3.25% is2.42%. This implies the buyer of the bond will receive a $24.2 payment from the bond issuer every year before maturity while holding the bond. 3. A three-year bond with $1,000 face-value and 10% coupon rate is sold for $1,000 today (YEAR 1). If one year later (Year 2) the market interest rate increases by 5%, then this bond will have a market price of $ ________ (round UP to the nearest integer) then (Year 2).
A 10-year bond has a coupon rate of 6.4% and pays coupons semi-annually. If the required return is 6.69%, how much should you be willing to pay for the bond today? Round to 2 decimal places. Include a dollar sign ($) or percent (%) as appropriate. NOTE: All bonds have a par value of $1000 that is paid at maturity. Answer:
A bond has a coupon rate of 5.2%, and 6.5 years until maturity. If the YTM is 6.2%, what is the price of this bond? TIP: Write the price as a percentage of the bonds par value. All bonds in this class make two coupon payments per year, and have a face value of $1,000. You don't need to write in the "%" sign.

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