7. Assume that you purchased an 8 percent, 20-year, $1,000 par, semiannual payment bondpriced at $1,012.50 when it has 12 years remaining until maturity. Compute:a. Its promised yield to maturityb. Its yield to call if the bond is callable in three years with an 8 percent premium

Bonds are the debt instrument which are generally issued at fixed interest. Some bonds have a…

Answered: 7. Assume that you purchased an 8…

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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on Assume that you purchase a 30-year stripped bond with a $100,000 face value. The current bond price is $9,937.73 and the yield is 8%. Calculate the interest revenue during the first year of holding the bond. Calculate amounts to nearest dollar, no $. Answer:
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A bond: pay $75 each year in interest, and a $1,000 payment at maturity. The $1,000 is called? A) couponB) face valueC) discountD) yield
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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.)
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7. Assume that you purchased an 8 percent, 20-year, $1,000 par, semiannual payment bond priced at $1,012.50 when it has 12 years remaining until maturity. Compute: a. Its promised yield to maturity b. Its yield to call if the bond is callable in three years with an 8 percent premium