A bond with a face value of $1,000 matures in 9years and has a 7% semiannual coupon. Thebond currently is traded at $900. Which of thefollowing statements is CORRECT?Select one:a. The nominal yield to maturity is 9.59%and you would sell each bond for $900 if youthink that a "fair" market interest rate(discount rate) for such bonds is 8.67%.b. The nominal yield to maturity is 4.80%and you would sell each bond for $900 if youthink that a "fair" market interest rate(discount rate) for such bonds is 6.67%.c. The nominal yield to maturity is 8.28%and you would sell each bond for $900 if youthink that a "fair" market interest rate(discount rate) for such bonds is 9.59%.d. The nominal yield to maturity is 8.62%and you would sell each bond for $900 if youthink that a "fair" market interest rate(discount rate) for such bonds is 10.67%.e. The nominal yield to maturity is 8.62%and you would sell each bond for $900 if youthink that a "fair" market interest rate(discount rate) for such bonds is 5.59%.

Yield to maturity is the rate of return realized by the bond when bond is held till maturity of bond…

A bond with a face value of $1,000 matures in 9 years and has a 7% semiannual coupon. The bond currently is traded at $900. Which of the following statements is CORRECT? Select one: a. The nominal yield to maturity is 9.59% and you would sell each bond for $900 if you think that a "fair" market interest rate (discount rate) for such bonds is 8.67%. O b. The nominal yield to maturity is 4.80% and you would sell each bond for $900 if you think that a "fair" market interest rate (discount rate) for such bonds is 6.67%. O c. The nominal yield to maturity is 8.28% and you would sell each bond for $900 if you

A bond with a face value of $1,000 matures in 9 years and has a 7% semiannual coupon. The bond currently is traded at $900. Which of the following statements is CORRECT? Select one: a. The nominal yield to maturity is 9.59% and you would sell each bond for $900 if you think that a "fair" market interest rate (discount rate) for such bonds is 8.67%. O b. The nominal yield to maturity is 4.80% and you would sell each bond for $900 if you think that a "fair" market interest rate (discount rate) for such bonds is 6.67%. O c. The nominal yield to maturity is 8.28% and you would sell each bond for $900 if you

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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Lantech investor is deciding between two bonds: Bond A pay $72 annual interest and has a market value of $925. It has 10 years to maturity. Bond B pays $62 annual interest and has a market value of $910. It has two years to maturity. Par value of the bonds is $1,000. A. What is the current yield on both bonds? B. Which bond should be chosen and why? C. A drawback of current yield is that is doesn't consider the total life of the bond. E.g. Yield to maturity on Bond A is 8.33 percent. What is the yield to maturity on Bond B? D. Is your answer changed from parts B and C based on which bond should be chosen?
What is the market price of a bond if the face value is $1,000 and the yield to maturity is 6.7% ? The bond has a 6.15% coupon rate and matures in 12 years. The bond pays interest semiannually. Please express answer as $X.XX or XX.XX and use rounding guideline included in "Course Information" module. Do not round until the final result.
Saved Bond P is a premium bond with a coupon rate of 9 percent. Bond D has a coupon rate of 5 percent and is currently selling at a discount. Both bonds make annual payments, have a par value of $1,000, a YTM of 7 percent, and 15 years to maturity. a. What is the current yield for Bond P and Bond D? (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) b. If interest rates remain unchanged, what is the expected capital gains yield over the next year for Bond P and Bond D? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) a. Bond P current yield a. Bond D current yield b. Bond P capital gains yield b. Bond D capital gains yield
A General Power bond carries a coupon rate of 9.2%, has 9 years until maturity, and sells at a yield to maturity of 8.2%. (Assume annual interest payments.) a. What interest payments do bondholders receive each year? b. At what price does the bond sell? Note: Do not round intermediate calculations. Round your answer to 2 decimal places. c. What will happen to the bond price if the yield to maturity falls to 7.2%? Note: Do not round intermediate calculations. Round your answer to 2 decimal places. A a. Interest payments b. Price c. Price will by
Consider a 10-year bond with a face value of $1,000 that has a coupon rate of 5.9%, with semiannual payments. a. What is the coupon payment for this bond? b. Draw the cash flows for the bond on a timeline. a. What is the coupon payment for this bond? The coupon payment for this bond is $ (Round to the nearest cent.)
A 30-year maturity bond making annual coupon payments with a coupon rate of 14.0% has duration of 11.36 years and convexity of 186.4. The bond currently sells at a yield to maturity of 8%. a. Find the price of the bond if Its yield to maturity falls to 7%. (Do not round Intermediate calculations. Round your answer to 2 decimal places.) Price of the bond b. What price would be predicted by the duration rule? (Do not round Intermediate calculations. Round your answer to 2 decimal places.) Predicted price c. What price would be predicted by the duration-with-convexity rule? (Do not round Intermediate calculations. Round your answ to 2 decimal places.) Predicted price
A 30-year maturity bond making annual coupon payments with a coupon rate of 14.5% has duration of 11.32 years and convexity of 185.2. The bond currently sells at a yield to maturity of 8%. Required: a. Find the price of the bond if its yield to maturity falls to 7%. (Do not round intermediate calculations. Round your answer to 2 decimal places.) Price of the bond b. What price would be predicted by the duration rule, if its yield to maturity falls to 7% ? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Predicted price
A General Power bond carries a coupon rate of 8.2%, has 9 years until maturity, and sells at a yield to maturity of 7.2%. (Assume annual interest payments.) a. What interest payments do bondholders receive each year? b. At what price does the bond sell? (Do not round intermediate calculations. Round your answer to 2 decimal places.) c. What will happen to the bond price if the yield to maturity falls to 6.2%? (Do not round intermediate calculations. Round your answer to 2 decimal places.) d. If the yield to maturity falls to 6.2%, will the current yield be less, or more, than the yield to maturity?
A bond has following characteristics: it was issued on 14.06.2018 and has 10 years to maturity. Coupon is paid semi-annually and carries interest rate of 3,2%. Market interest rate is currently 2,9% for similar issues. Investor purchased the bond on 19.11.2021. a. Calculate MacDuration b. Calculate ModDuration c. When market interest rates increase by 50 basis points, calculate price effect using results obtained in question (b)
A 12-year bond pays semi – annual coupons at j₂ = 9% and has a yield rate of j2 = 7.2%. If the book value immediately after the 7 th coupon payment is $1107.49, and the book value immediately after the 11 th coupon payment is $1085.83, what is the bond's face value? Answer: $ NOTE: Assume the note is NOT redeemable at par. You have attempted this problem 2 times. Your overall recorded score is 0%. You have 1 attempt remaining.
A bond with a face value of $1,000 has 10 years until maturity, has a coupon rate of 5.2%, and sells for $1,105. a. What is the current yield on the bond? (Enter your answer as a percent rounded to 2 decimal places.) 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.) 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.)
You buy a bond for $964 that has a coupon rate of 6.60% and a maturity of 7-years. A year later, the bond price is $1,104. (Assume a face value of $1,000 and annual coupon payments.) a. What is the new yield to maturity on the bond? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.) Yield to maturity % b. What is your rate of return over the year? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.) Rate of return

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