A 3.90 percent coupon municipal bond has 11 years left to maturity and has a price quote of 97.45. The bond can be called in four years. The call premium is one year of coupon payments (Assume interest payments are semiannual and it has a par value of $5,000) Compute the bond's current yield Compute the yield to maturity Compute the taxable equivalent yield (for an investor in the 36 percent marginal tax bracket). Compute the yield to call Note: Do not round intermediate calculations. Round your answer to 2 decimal places. Current yield Yield to maturity Equivalent taxable yield Yield to call % % % %

A 3.90 percent coupon municipal bond has 11 years left to maturity and has a price quote of 97.45. The bond can be called in four years. The call premium is one year of coupon payments (Assume interest payments are semiannual and it has a par value of $5,000) Compute the bond's current yield Compute the yield to maturity Compute the taxable equivalent yield (for an investor in the 36 percent marginal tax bracket). Compute the yield to call Note: Do not round intermediate calculations. Round your answer to 2 decimal places. Current yield Yield to maturity Equivalent taxable yield Yield to call % % % %

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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Bond P is a premium bond with a 10 percent coupon. Bond D is a 6 percent coupon bond currently selling at a discount. Both bonds make annual payments, have a YTM of 8 percent, and have five years to maturity. (Assume par value of K1,000)(i) What is the current yield for Bond P and Bond D?(ii) If interest rates remain unchanged, what is the expected capital gains yield over the next year for Bond P? For Bond D?(iii)Explain your answers and the interrelationship among the various types of yields.
Consider two zero coupon bonds in which you receive $100 at the maturity date, one maturing in three years and one maturing in five years. Both are currently priced to yield 6 percent. Calculate the current market value of each bond.
Assume that you are considering the purchase an AEP 30-year, bond with an annual coupon rate of 8.22%. The bond has a face value of $1,000, and it makes semiannual interest payments. If you require an 11.45% yield to maturity on this investment, what is the maximum price you should be willing to pay for the bond? $824.55 $945.01 $904.47 891.25 $727.90
A 5-year bond with a yield of 4% (continuously compounded), with a face value of $100, pays an 3% coupon at the end of each year. What is the bond’s price? (You can use your calculations for the next questions) A 5-year bond with a yield of 4% (continuously compounded) pays an 3% coupon at the end of each year. What is the bond’s duration? Use the calculations from the previous problem to make it easier, and you can use your duration answer for the following question.
Consider a bond with a face value of $1,000. The coupon is paid semiannually and the market interest rate (effective annual interest rate) is 8 percent. How much would you pay for the bond if a. the coupon rate is 6 percent and the remaining time to maturity is 10 years?
Consider a bond (with par value = $1,000) paying a coupon rate of 10% per year semiannually when the market interest rate is only 4% per half-year. The bond has three years until maturity. Required: a. Find the bond's price today and six months from now after the next coupon is paid. b. What is the total (6-month) rate of return on the bond? Complete this question by entering your answers in the tabs below. Required A Required B Find the bond's price today and six months from now after the next coupon is paid. Note: Round your answers to 2 decimal places. Current price Price after six months $ $ 1,052.42 1,044.52
A 2.70 percent coupon municipal bond has 11 years left to maturity and has a price quote of 95.55. The bond can be called in four years. The call premium is one year of coupon payments. (Assume interest payments are semiannual and a par value of $5,000.) Compute the bond
A 4.00 percent coupon municipal bond has 12 years left to maturity and has a price quote of 95.55. The bond can be called in four years. The call premium is one year of coupon payments. (Assume interest payments are semiannual and it has a par value of $5,000.) Compute the bond's current yield. Compute the yield to maturity. Compute the taxable equivalent yield (for an investor in the 30 percent marginal tax bracket). Compute the yield to call.
A bond is currently selling for $1040. It pays the amounts listed in the picture at the ends of the next six years. The yield of the bond is the interest rate that would make the NPV of the bond’s payments equal to the bond’s price. Use Excel’s Goal Seek tool to find the yield of the bond.
A 4.40 percent coupon municipal bond has 16 years left to maturity and has a price quote of 105.50. The bond can be called in eight years. The call premium is one year of coupon payments. (Assume interest payments are semiannual and a par value of $5,000.) Compute the bond’s current yield. (Do not round intermediate calculations. Round your answer to 2 decimal places.) Compute the yield to maturity. (Do not round intermediate calculations. Round your answer to 2 decimal places.) Compute the taxable equivalent yield (for an investor in the 35 percent marginal tax bracket). (Do not round intermediate calculations. Round your answer to 2 decimal places.) Compute the yield to call. (Do not round intermediate calculations. Round your answer to 2 decimal places.)
A 6.05 percent coupon bond with 18 years left to maturity can be called in six years. The call premium is one year of coupon payments. It is offered for sale at $1,085.50. What is the yield to call of the bond? (Assume interest payments are semiannual.) (Round your answer to 2 decimal places.)
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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