A 30-year maturity bond has a 6.7% coupon rate, paid annually. It sells today for $881.17. A 20-year maturity bond has a 6.2% coupon rate, also paid annually. It sells today for $893.1. A bond market analyst forecasts that in five years, 25-year maturity bonds will sell at yields to maturity of 7.7% and 15-year maturity bonds will sell at yields of 7.2 % . Because the yield curve is upward sloping, the analyst believes that coupons will be invested in short-term securities at a rate of 7.2%. a. Calculate the (annualized) expected rate of return of the 30-year bond over the 5-year period. (Round your answer to 2 decimal places.) Answer is complete but not entirely correct. 30-year bond 44.95% b. What is the (annualized) expected return of the 20-year bond? (Round your answer to 2 decimal places.) Answer is complete but not entirely correct. 20-year bond 41.98 %

A 30-year maturity bond has a 6.7% coupon rate, paid annually. It sells today for $881.17. A 20-year maturity bond has a 6.2% coupon rate, also paid annually. It sells today for $893.1. A bond market analyst forecasts that in five years, 25-year maturity bonds will sell at yields to maturity of 7.7% and 15-year maturity bonds will sell at yields of 7.2 % . Because the yield curve is upward sloping, the analyst believes that coupons will be invested in short-term securities at a rate of 7.2%. a. Calculate the (annualized) expected rate of return of the 30-year bond over the 5-year period. (Round your answer to 2 decimal places.) Answer is complete but not entirely correct. 30-year bond 44.95% b. What is the (annualized) expected return of the 20-year bond? (Round your answer to 2 decimal places.) Answer is complete but not entirely correct. 20-year bond 41.98 %

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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Dynamic Systems has an outstanding bond that has a $1,000 par value and a 7 percent coupon rate. Interest is paid semiannually. The bond has 11 years remaining until it matures. Today the going interest rate is 10 percent, and it is expected to remain at this level for many years in the future. Compute the (a) current yield and (b) capital gains yield that the bond will generate this year.
A corporate bond pays interest twice a year and has 20 years to maturity, a face value of $1,000 and a coupon rate of 2.3%. The bond's current price is $744.62. It is callable starting 14 years from now (years to call) at a call price of $1,511. What is the bond's (annualized) yield to maturity? What is the bond's (annualized) yield to call?
A bond with 9 years to maturity has an annual coupon rate of 3.6% and pays interest semiannually. Assume that today we are 64 days into the current 183-day coupon payment period. What is the amount of accrued interest on this bond, per $100 of par value?
A 15-year, $1000 par value bond has an 7.50% annual coupon. The bond currently sells for $1150. If the yield to maturity remains at its current rate, what will the price be 6 years from now? State whether it is a discount or premium bond?
A $1,000 bond has a coupon of 4 percent and matures after tên years. ASsume that the bond pays interest annually. a. What would be the bond's price if comparable debt yields 6 percent? Use Appendix B and Appendix D to answer the question. Round your answer to the nearest dollar. $ b. What would be the price if comparable debt yields 6 percent and the bond matures after five years? Use Appendix B and Appendix D to answer the question. Round your answer to the nearest dollar. c. Why are the prices different in a and b? The price of the bond in a is -Select- v than the price of the bond in b as the principal payment of the bond in a is -Select- v than the principal payment of the bond in b (in time). d. What are the current yields and the yields to maturity in a and b? Round your answers to two decimal places. The bond matures after ten years: CY: % YTM: % The bond matures after five years: CY: YTM:
A corporate bond pays interest twice a year and has 22 years to maturity, a face value of $1,000 and a coupon rate of 6.1%. The bond's current price is $1,463.61. It is callable starting 16 years from now (years to call) at a call price of $1,047. What is the bond's (annualized) yield to maturity?
A bond matures in 15 years and pays an 8 percent annual coupon. The bond has a face value of $1,000 and currently sells for $985. What is the bond’s current yield and yield to maturity? . The face value for WICB Limited bonds is $250,000 and has a 6 percent annual coupon. The 6 percent annual coupon bonds matures in 2035, and it is now 2020. Interest on these bonds is paid annually on December 31 of each year, and new annual coupon bonds with similar risk and maturity are currently yielding 10 percent. How much should Karen sell her bonds today? What is the semi-annual coupon bond’s nominal yield to maturity (YTM), if the years to maturity is 15 years, and sells for 119% with coupons rate of 10%? Assume the par value of the bond is $1,000. MJI Corporation bonds mature in 6 years and have a yield to maturity of 8.5 percent. The par value of the bonds is $1,000. The bonds have a 10 percent coupon rate and pay interest on…
A bond currently trades at $1,153.72. It has a 12% annual coupon, paid semi-annually, and 15 years to maturity. What is the bond's yield to maturity?
A bond has just been issued. The bond has an annual coupon rate of 7% and coupons are paid annually. The bond has a face value of $1,000 and will mature in 7 years. The bond’s yield to maturity is 9%. Calculate the actual change in the bond’s price as the yield to maturity changes from 9% to 11%. Use the bond’s duration to calculate the approximate bond price change as the yield to maturity changes from 9% to 11%.
Today, a bond has a coupon rate of 12.1%, par value of $1,000, YTM of 8.20%, and semi-annual coupons with the next coupon due in 6 months. One year ago, the bond's price was $1,281.05 and the bond had 5 years until maturity. What is the current yield of the bond today?
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