9. A bond you are evaluating has a 10 percent coupon rate (compounded semiannually), a $1,000 face value, and is 10 years frommaturity. (LG 3-49)a. If the required rate of return on the bond is 6 percent, what is its fair present value?b. If the required rate of return on the bond is 8 percent, what is its fair present value?e. What do your answers to parts (a) and (b) say about the relation between required rates of return and fair values of bonds?10. Calculate the vield to maturitu on h en

Bonds are the securities issued by the entity in order to raise finance. These are an obligation on…

Answered: A bond you are evaluating has a 10…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Bond A makes semi-annual interest payments of $30. Bond B makes an annual payment of $50. All else equal, which one has the lower coupon rate? Select one: a. B b. A=B c. A
1)Your broker offers to sell for $1,157 a AAA-rated bond with a coupon rate of 7 percent and a maturity of six years. Given that the interest rate on comparable debt is 4 percent, calculate the bond's price. Assume that the bond pays interest annually. Use Appendix B and Appendix D to answer the question. Round your answer to the nearest dollar. 2)Is your broker fairly pricing the bond? 3)the bond should or should not be purchased?
You have a bond with the following features: - Semi-annual coupon payments. - Coupon rate 7.60%. - Face value $1,000. - 3.5 years to maturity. - Current market price $1,130. Requirements (A, B, and C are independent): 1. Calculate the duration and modified duration for this bond. Duration ___ Mduration ___ 2. Now, let’s assume the modified duration of this bond is 3 years. If the yield increases by 30 bps (basis points), what will the new price of the bond using modified duration? 3. If the yield drops by 75 bps, what is the actual new price of the bond?
Suppose the current price of the bond is $95, the YTM is 4%, and the duration of the bond is 9. If YTM decrease from 4% to 3.9%, approximate the change in price using duration of the bond. Price would increase by ____%
A newly issued bond pays its coupons once a year. Its coupon rate is 4.7%, its maturity is 15 years, and its yield to maturity is 7.7%. a. Find the holding-period return for a one-year investment period if the bond is selling at a yield to maturity of 6.7% by the end of the year. (Do not round intermediate calculations. Round your answer to 2 decimal places.) Holding-period return % b. If you sell the bond after one year when its yield is 6.7%, what taxes will you owe if the tax rate on interest income is 40% and the tax rate on capital gains income is 30%? The bond is subject to original-issue discount (OID) tax treatment. (Do not round intermediate calculations. Round your answers to 2 decimal places.) Tax on interest income $ Tax on capital gain $ Total taxes $ c. What is the after-tax holding-period return on the bond? (Do not round intermediate calculations. Round your answer to 2 decimal places.)…
am. 49.
BASIC (Questions 1-17) 1. Interpreting Bond Yields Is the yield to maturity on a bond the same thing as the required return? Is YTM the same thing as the coupon rate? Suppose today a 10 percent coupon bond sells at par. Two years from now, the required return on the same bond is 8 percent. What is the coupon rate on the bond now? The YTM? LO 2 LO 2 2. Interpreting Bond Yields Suppose vou buy a 7 percent counon 20-vear
Suppose a 10-year, $1,000 bond with an 8.6% coupon rate and semi-annual coupons is trading for a price of $1,035.22. a. What is the bond's yield to maturity (expressed as an APR with semi-annual compounding)? b. If the bond's yield to maturity changes to 9.3% APR, what will the bond's price be? **** a. What is the bond's yield to maturity (expressed as an APR with semi-annual compounding)? The bond's yield to maturity is%. (Round to two decimal places.)
Required: a. Find the duration of a 8% coupon bond making annual coupon payments if it has three years until maturity and a yield to maturity of 6.9%. (Do not round intermediate calculations. Round your answers to 4 decimal places.) b. What is the duration if the yield to maturity is 10.9% ? (Do not round intermediate calculations. Round your answers to 4 decimal places.) YTM a. 6.9% YTM b. 10.9% YTM Duration Years Years

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