A B D. Analysis Bond 3 Face Value Coupon Rate 5 Interest Rate (YTM) 5 Bond matures in 7 Coupons are paid annually 100,000 9.1% 10.2% 7 years 1 What is the price of the bond? O A Between 70,000 and 90,000 1 B Between 90,000 and 100,000 2 C Between 100,000 and 110,000 3 D Between 110,000 and 140,000 4 5 2 What if coupons were paid semi-annually? 6 A Between 70,000 and 90,000 7 B Between 90,000 and 100,000 8 C Between 100,000 and 110,000 9 D Between 110,000 and 140,000

A B D. Analysis Bond 3 Face Value Coupon Rate 5 Interest Rate (YTM) 5 Bond matures in 7 Coupons are paid annually 100,000 9.1% 10.2% 7 years 1 What is the price of the bond? O A Between 70,000 and 90,000 1 B Between 90,000 and 100,000 2 C Between 100,000 and 110,000 3 D Between 110,000 and 140,000 4 5 2 What if coupons were paid semi-annually? 6 A Between 70,000 and 90,000 7 B Between 90,000 and 100,000 8 C Between 100,000 and 110,000 9 D Between 110,000 and 140,000

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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QUESTION ONE What are the main characteristics of a bond? Provide examples of different types of bonds in terms of coupons and maturity. Explain the difference between coupon rate and yield to maturity. Show, using examples, how changes in the coupon rate and yield to maturity affects the bond price. You are asked to put value on a bond which promises 8 annual coupon payments of £50 and will repay its face value of £1000 at the end of 8 years. You observe that other similar bonds have yields to maturity of 9%. How much is this bond worth? You are offered the bond for a price of £755.5, what yield to maturity does this represent? You believe that next year XYZ plc will pay a dividend of £2 on its common stock. Thereafter, you expect dividends to grow at a rate of 4% a year in perpetuity. If you require a return of 12% on your investment. How much should you be prepared to pay for the stock? Assuming that the expected stock price at the end of year 5 is £37.6, calculate the return on…
Activity 2 XYZ Co. Ltd is considering investing in a bond currently selling for $8,800. The coupon rate is 8%. The bond has a face value of $10,000 and maturity of 4 years. The appropriate discount rate for bonds of this type is 10%. (i) What is the intrinsic value of the bond? Should the company buy the bond? (ii) What is the yield to maturity on this bond?
Given only the information provided, which bond would you suspect of having the lowest duration? Coupon Current Price Remaining Term Bond A 5% $ 703.11 20 years Bond B 7% $ 932.05 10 years Bond C 11% $ 1,078.63 3 years Bond D 11% $ 1,296.89 20 years Question 18 options: Bond A Bond B Bond C Bond D
Part 1 Consider a five-year, default-free bond with annual coupons of 5% and a face value of $1,000 and assume zero-coupon yields on default-free securities are as summarized in the following table: Maturity 1 year 2 years 3 years 4 years 5 years Zero-Coupon Yields 4.00% 4.30% 4.50% 4.70% 4.80% a. What is the yield to maturity on this bond? b. If the yield to maturity on this bond increased to 5.20%, what would the new price be?
a. b. C. Problem 9.4: R & J, Inc. issues a 10-year $1,000 bond that pays $28.50 semi-annually. The market price for the bond is $975. The market's required yield to maturity on a comparable-risk bond is 6 percent. a. What is the value of the bond to you?. b. What happens to the value if the market's yield to maturity on a comparable-risk bond (i) increases to 8 percent or (ii) decreases to 4 percent? c. Under which of the circumstances in parts a & b should you purchase the bond? Years Par (FV) PMT Nper m Comparable risk (Rate) Bond value (PV) Comparable risk (Rate) Bond value (PV) Comparable risk (Rate) Bond value (PV)
Problem 6-6 Bond Yields (LO1, 2) A bond with a face value of $1,000 has 8 years until maturity, has a coupon rate of 6.0%, and sells for $1,075. a. What is the current yield on the bond? (Enter your answer as a percent rounded to 2 decimal places.) Current yield % b. What is the yield to maturity if interest is paid once a year? (Do not round intermediate calculations. Enter your answer as a percent rounded to 4 decimal places.) Yield to maturity c. What is the yield to maturity if interest is paid semiannually? (Do not round intermediate calculations. Enter your answer as a percent rounded to 4 decimal places.) Yield to maturity
Question 5 0/1 Oscorp has just issued its Norman Special Long Bond. The bonds have a maturity of 25 years, a coupon rate of 0.50% and pay the coupon on a semi-annual basis. The face value of the bond is $1000. The bonds are trading at a YTM of 5.00%. What is the current yield of these? (Enter your answer as a % accurate to two decimal points. DO NOT add a % symbol or any extraneous punctuation.)
$1,000 par value zero-coupon bonds (ignore liquidity premiums) Bond Years to Maturity Yield To Maturity A 1 6% B 2 7.5% C 3 7.99% D 4 8.49% E 5 10.7% What should be the expected 3-year interest rate 2 years from now?
Assume 2 bonds with following features with the following features bond A B Par value 100 100 Coupon rate 10% 8% Required: a)Determine the value of the bonds. Assume an interest rate of 12% b)If the rates increase by 1%, which bond would you choose?
BOND PRICE A B с 101.886 5% 100 6% 97.327 5% COUPON TIME TO RATE O Bond C Bond A Which bond will most likely experience the smallest percentage change in price if the market discount rates for all three bonds increase by 100 basis point? Bond B MATURITY 2 years 2 years 3 years
QUESTION 15 Suppose that all investors expect that the interest rates for the 4 years will be as follows. What is the price of a 3-year zero coupon bond with par-$1,000? Year 1-Year Forward rate 4.6% 2 4.9% 3 5.2% 4 5.5% O a. $1,000.00 Ob. $866.32 Oc. $858.92 Od. $821.15
2. Bond A B C D A commercial bank has the following bond investments: Face Value 1,500,000 2,250,000 1,050,000 2,425,000 Bond Price 98.65 101.45 96.55 94.56 Remaining Life (in Yrs) 2.35 3.24 4.01 4.17 Modified Duration 3.25 3.78 4.23 5.04 Convexity 22.56 29.76 34.56 55.67 a. What is the overall market value of the bond investments? b. Determine the average modified duration and convexity of the bond investment. c. By how much will the overall value of the bond investments change if yields went up by 0.25%?

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