A $1,000 par value bond was issued 20 years ago at a 12 percent coupon rate. It currently has 15 years remaining to maturity. Interestrates on similar obligations are now 10 percent. Assume Ms. Bright bought the bond three years ago when it had a price of $1,020Further assume Ms. Bright paid 25 percent of the purchase price in cash and borrowed the rest (known as buying on margin). Sheused the interest payments from the bond to cover the interest costs on the loan.a. What is the current price of the bond? Use Table 16-2. (Input your answer to 2 decimal places.)Price of the bondb. What is her dollar profit based on the bond's current price? (Do not round intermediate calculations and round your answer to 2decimal places.)Dollar profitc. How much of the purchase price of $1,020 did Ms. Bright pay in cash? Do not round intermediate calculations and round youranswer to 2 decimal places.)Purchase price paid in cash$255.00d. What is Ms. Bright's percentage return on her cash investment? Divide the answer to part b by the answer to part c. (Do not roundIntermediate calculations. Input your answer as a percent rounded to 2 decimal places.) Table 16-2 Interest rates and bond prices (face value is $1,000 and annualcoupon rate is 12%)B234567ACDRate in the Market (%)-Annual Yield to Maturity*8%10%12%14%$1,037.72$1,018.59 $1,000.00 $981.92$1,345.84$1,153.72$1,429.64 $1,182.56Years to Maturity1152516%$964.33$1,000.00 $875.91 $774.84$1,000.00 $861.99$755.33G=+PV(F2/2,A5*2,-120/2,-1000)+PV(rate,nper,pmt [fv])

Bond price refers to the present value of the future payments in a discounted form that reflects the…

A $1,000 par value bond was issued 20 years ago at a 12 percent coupon rate. It currently has 15 years remaining to maturity. Im rates on similar obligations are now 10 percent. Assume Ms. Bright bought the bond three years ago when it had a price of $1,0 Further assume Ms. Bright paid 25 percent of the purchase price in cash and borrowed the rest (known as buying on margin). S used the interest payments from the bond to cover the interest costs on the loan. a. What is the current price of the bond? Use Table 16-2. (Input your answer to 2 decimal places.) Price of the bond b. What is her dollar profit based on the bond's current price? (Do not round intermediate calculations and round your answer decimal places.) Dollar profit

A $1,000 par value bond was issued 20 years ago at a 12 percent coupon rate. It currently has 15 years remaining to maturity. Im rates on similar obligations are now 10 percent. Assume Ms. Bright bought the bond three years ago when it had a price of $1,0 Further assume Ms. Bright paid 25 percent of the purchase price in cash and borrowed the rest (known as buying on margin). S used the interest payments from the bond to cover the interest costs on the loan. a. What is the current price of the bond? Use Table 16-2. (Input your answer to 2 decimal places.) Price of the bond b. What is her dollar profit based on the bond's current price? (Do not round intermediate calculations and round your answer decimal places.) Dollar profit

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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Assume that Peter purchased a 25-year, 7.24 percent coupon (annual payments) bond at par ($1,000). He sold the bond after 4 years for $1,095.55. He reinvested the coupon payments at the 4.75 percent compounded annually. Calculate the bond's total yield.
A client owns a $1,000 10-year bond. The coupon rate is 6 percent. The client acquired the bond three years ago at a discount. What is knwon about the interest rates three years ago? A. The stated rate was less than 6 percent. B. The stated rate was more than 6 percent. C The market rate was less than 6 percent. D. The market rate was more than 6 percent.
Albert purchased a bond with exactly 20 years to redemption. The bond pays annual coupons, in arrears, of 5% per annum and is redeemed at par. Albert, who is not liable to pay tax, will obtain a gross redemption yield of 6% per annum if he holds the bond utill redemption. (a) Calculate the purchase price Albert paid for the bond, per $100 nominal if his intention was to hold the bond utill redemption. (b) After exactly ten years, immediately after receiving payment of the coupon then due, Albert sells the bond to Vicky who is liable to pay income tax and capital gains tax at a rate of 30%. The bond is purchased by Vicky to provide a net rate of return of 6.5% per annum. (i) Calculate the price Vicky paid for the bond, per $100 nominal. (ii) Using trial-and-error followed by linear interpolation, calculate the annual effective rate of return, correct to 4 decimal places, earned by Albert during the period for which he held the bond.
A $1,000 par value bond was issued 20 years ago at a 9 percent coupon rate. It currently has 5 years remaining to maturity. Interest rates on similar debt obligations are now 10 percent. Compute the current price of the bond using an assumption of semiannual payments. If Mr. Robinson initially bought the bond at par value, what is his percentage loss (or gain)? Now assume Mrs. Pinson buys the bond at its current market value and holds it to maturity, what will her percentage return be? Although the same dollar amounts are involved in parts b and c,explain why the percentage gain is larger than the percentage loss.
Four years ago, Helen Stills bought six-year, 5.0 percent coupon bonds issued by the Ivanhoe Corp. for $954.80. If she sells these bonds at the current price of $892.92, what will be her realized yield on the bonds? Assume similar coupon-paying bonds make annual coupon payments. (Round intermediate calculations to 5 decimal places, e.g. 1.25145 and final answer to 2 decimal places, e.g. 15.25%.)
Help me please
Four years ago, Sandra Stills bought six-year, 5.5 percent coupon bonds issued by the Oriole Corp. For $944.99 she sells these bonds at the current price of $892.26, what will be her realized yield on the bonds? Assume similar coupon-paying bonds make annual coupon payments. Assume face value is $1000. (Round to 2 decimal places)
Four years ago, Sandra Stills bought six-year, 5.5 percent coupon bonds issued by the Oriole Corp. for $944.99. If she sells these bonds at the current price of $892.26, what will be her realized yield on the bonds? Assume similar coupon-paying bonds make annual coupon payments. Assume face value is $1,000. (Round intermediate calculations to 5 decimal places, e.g. 1.25145 and final answer to 2 decimal places, e.g. 15.25%.) Realised rate of return %
ABC Company issued a $250,000 bond at the coupon rate of 2 percent payable semi-annually. Now, the bond has a remaining life of 4 years. i. Two years from now, you bought the ABC bond when the market interest rate for a new ABC bond is 4 percent. How much did you pay for the bond? ii. You sold the bond purchased in part i. after holding it for a year, when interest rates (for bonds of similar risk as ABC's bonds) fell to 3 percent. What is the percentage gain / loss on the bond? Illustrate your answer using the bond valuation equation.
ART Vandelay Inc. has two different bonds currently outstanding. Bond A has a face value of $40,000 and matures in 20 years. The bond makes no payment for the first 6 years, pays $2000 semiannually for the subsequent eight years, and finally $2500 semiannually for the last 6 years. Bond B also has a value of $40,000 and matures in 20 years. However, it makes no coupon payments over the life of the bond. If the stated annual interest rate is 12%, compounded semiannually, a. What is the current price of Bond A? b. What is the current price of Bond B?
A zero-coupon bond pays no interest during its lifetime. Upon maturity, the investor receives face value. The purchase price determines the rate of return. (a) Henri paid $10,750 for a $20,000 face value zero-coupon bond that matures in 10 years. Find the annual compound rate of interest received. (Round your answer to two decimal places.) % (b) Sandi plans to purchase a zero-coupon bond with a face value of $10,000 and matures in 7 years. She wants to earn 7.1% compounded annually. Find the price. she should pay. (Round your answer to two decimal places.) Additional Materials
Bones Ely owns a $1,000 face-value bond with three years to maturity. The bond makes annual interest payments of$75, the first to be made one year from today. The bond is currently priced at $975.48. Given an appropriate discount rate of 10%, should Bones hold or sell the bond?

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