7. Suppose you are deciding whether or not to buy a particular bond for $2,990.08. If you buy the bond and hold it for 5 years, then at that time you will receive a payment of $5,000. You will buy the bond today if the interest rate is a. no less than 9.48 percent. b. no greater than 9.48 percent. c. no less than 10.83 percent. d. no greater than 10.83 percent.

7. Suppose you are deciding whether or not to buy a particular bond for $2,990.08. If you buy the bond and hold it for 5 years, then at that time you will receive a payment of $5,000. You will buy the bond today if the interest rate is a. no less than 9.48 percent. b. no greater than 9.48 percent. c. no less than 10.83 percent. d. no greater than 10.83 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

Problem 1PS

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A bond is issued at a price of $200and pays a interest of $18 per year for the next 20 years. If the interest rate in the market is 7% and the bond is redeemed for a price of $230 then what is the price of the bond today? Question 2 options: $250 $215 $185 $230
If you buy municipal bond (tax free) that cost $1,000 and will pay a 4.7% coupon every year for the next 10 years (so the maturity date is in 10 years). At maturity the bond returns the original $1,000. If there is a 2.5% annual inflation, a) what real rate of return will you receive? b) How much real $ profit did you make from the bond?
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
A. you are offered to buy a 4 year coupon bond in the beginning of its 7th month on its third year for $963.94. its face value is $1,000 and its coupon rate is 5.172% per annum, with coupon paid at the end of each quarter . government bond rate now is 6.9%. a. is $963.94 a good price for you to buy it or not ? what is the fair price for the bond ? b. what is the yield if you buy at the price that you have been offered ? c. if the government bond rate suddenly goes down to 4.7%, what will be the fair value of the bond ? B. the company just paid $1.48 annual dividend and announce the plns to pay $1.54 next year . the dividend growthrate is expected to remain constant at the current level for the following 4 years and then settle at 3% per year , if you are planning to buy this stock in 2 years time, how much would you expect to pay for it if the required rate of return is 7% at the time of your purchase ? ( use two deciaml rounding )
You have purchased a U.S. Treasury bond for $3,000. No payments will be made until the bond matures 10 years from now, at which time it will be redeemed for $5,000. What interest rate will you earn on this bond? 3.82% 4.25% 4.72% 5.24% 5.77%
The Central Bank of The Bahamas offers to sell you a bond for $585.43. No payments will be made until the bond matures 10 years from now, at which time it will be redeemed for $1,000. What interest rate would you earn if you bought this bond for $585.43? What rate would you earn if you could buy the bond for $550? For $600?
solution
klp.3
1.ABC Company offers to sell you a bond for $613.91. No payments will be made until the bond matures 10 years from now, at which time it will be redeemed for $1,000. What interest rate would you earn if you bought this bond at the offer price?a. 6.71%b. 5.91%c. 5.59%d. 5.00%2.At a rate of 8%, what is the present value of the following cash flow stream? $0 at now; $100 at the end of Year 1; $300 at the end of Year 2; $0 at the end of Year 3; and $500 at the end of Year 4.a.$ 717.31b.$788.32c. $625.54d. $701.153. ABC company has received a $50,000 loan from a bank. The annual payments are $6,202.70. If the company is paying 9% interest per year, how many loan payments must the company make?a. 12b. 19c. 15d. 134. ABC Company has 100,000 unit of common stock outstanding, its net income is $750,000, and its P/E ratio is 8. What is the company’s stock price?a. $40.00b. $20.00c. $60.00d. $30.005. ABC company 2005 sales were $100 million. If sales grow at 8% per year, how much would it be in…
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%
3. Present Value of Annuity and Perpetuity - Show your steps! (You must simplify your answer use the formula for Geometric series.) 1 A bond with a face value of y pays out interest at rate r annually. The discount rate you should use for the bond is i. (That is, the present value of $1 received a year from now is $11, and the present value of 1 dollar received 2 years from now is $- .) What is the present value of owning the bond that pays its first interest a year from now if (a) The bond pays interest for n years and pays back the face value at the last year. (b) The bond pays interest forever and never pays back the face value. (1+i)²

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