A few years ago, you paid $10,000 to buy a corporate bond with a face value (maturity value) of $10,000 that has a coupon rate of 4% payable semi-annually (pays $200 every 6 months). If the bond matures in 10 years, how much is it worth today if the interest rate for similar bonds is 6% compounded semi-annually? A) $7002.52 B) $5,734.90 C) $8,468.28 D) $2,561.26 E) $8,512.25
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- The company you work for is offering bonds that have a face value of $1,000 and a life of 10 years. Since $40 or 46 of the face value is paid every 6 months, the bond has a nominal or coupon rate of 8w per year. If your company paid and underwer 19 to sell the bond, which answer is closest to the effective annual interest rate that the company is paying on the bond? a. 7.160% b. 4,077% C. 4.500% d. 8.320% e. None of theseThe Altoona Company issued a 25-year bond 5 years ago with a face value of $1,000. The bond pays interest semiannually at a 10% annual rate. What is the bond's price today if the interest rate on comparable new issues is 12%? What is the price today if the interest rate is 8%? Explain the results of parts a and b in terms of opportunities available to investors. What is the price today if the interest rate is 10%? Comment on the answer to part d.The Altoona Company issued a 25-year bond 5 years ago with a face value of $1,000. The bond pays interest semiannually at a 10% annual rate. What is the bond's price today if the interest rate on comparable new issues is 12%? What is the price today if the interest rate is 8%? Explain the results of parts a and b in terms of opportunities available to investors. What is the price today if the interest rate is 10%? Comment on the answer to part d. My teacher gave me this solution: SOLUTION: PB = PMT [PVFAk,n] + FV [PVFk,n] n = 20 ´ 2 = 40 k = 12/2 = 6 PMT = $1,000 ´ .10/2 = $50 FV = $1,000 PB = $50 [PVFA6,40] + $1,000 [PVF6,40] = $50 (15.046 3) + $1,000 (.0972) = $849.52 Bartleby gave me this answer earlier tonight: particulars periods cash flows ($) PVF @ 6% Present Value ($) coupon payments ($1,000 X 5%) 1 to 50 50.00 15.469974 773.4987164 payment on redemption 50 1000 0.053283 53.283021178 Present…
- The Altoona Company issued a 25-year bond 5 years ago with a face value of $1,000. The bond pays interest semiannually at a 10% annual rate. What is the bond's price today if the interest rate on comparable new issues is 12%? What is the price today if the interest rate is 8%? Explain the results of parts a and b in terms of opportunities available to investors. What is the price today if the interest rate is 10%? Comment on the answer to part d. The first three subparts have been answered. Please answer #4 and #5. Should be pretty simple, but I just want to make sure I understand the material.1. You bought a bond five years ago for $935 per bond. The bond is now selling for $980. It also paid $75 in interest per year, which you reinvested in the bond. Calculate the real ized rate of return earned on this bond. 2. Refer again to the bond information in Problem 1. You expect to hold the bond for three more years, then sell it for $990. If the bond is expected to continue paying $75 per year over the next three years, what is the expected rate of return on the bond during this period? (LG 3-1)A.) You bought a bond five years ago for $935 per bond. The bond is now selling for $980. It also paid $75 in interest per year, which you reinvested in the bond. Calculate the realized rate of return earned on this bond. B.) Refer again to the bond information in Problem 1. You expect to hold the bond for three more years, then sell it for $990. If the bond is expected to continue paying $75 per year over the next three years, what is the expected rate of return on the bond during this period?
- A company issued a bond a few years ago that has a face value equal to $1,000 and pays investors $30 interest every six months. The bond has eight years remaining until maturity. If you require a 7 percent rate of return to invest in this bond, what is the maximum price you should be willing to pay to purchase the bond? * $965.63 $1,062.81 $939.53 $940.29 O $761.15A $1,000 face value bond issued by the Purdue Company currently pays total annual interest of $80 per year and has a 15-year life. a-What is the present value, or worth, of this bond if investors are willing to accept a 10 percent annual rate of return on bonds of similar quality bond? b. How would your answer change is the bond makes semi-annual payments? c-How would your answer in (a) change if, one year from now, investors only required a 6 percent annual rate of return on bond investments similar in quality to the Purdue bond? d-Suppose the original bond can be purchased for $925. What is the bond’s yield to maturity?A few years ago, Zabar Technology issued an annual bond that has a face value equal to $1,000 and pays investors $40 interest semiannually. The bond has four years remaining until maturity. If an investor requires a 5% rate of return to invest in this bond, what is the maximum price he or she should be willing to pay to purchase the bond today? O $1,106.38 O $964.54 O $1,107.55 $935.37
- Please provide whole answer: A company has a bond outstanding. Bond A has a face value of $20,000 and matures in 20 years. The bond makes no payments for the first six years, then pays $900 every six months over the subsequent eight years, and finally pays $1,300 every six months over the last six years. If the required return on this bond is 5.4% compounded semiannually, what is the current price of Bond A? What would be the price if the bond was compounded quarterly?Suppose Ford Motor Company issues a five year bond with a face value of $5,000 that pays an annual coupon payment of $150. a. What is the interest rate Ford is paying on the borrowed funds? b. Suppose the market interest rate rises from 3% to 4% a year after Ford issues the bonds. Will the value of the bond increase or decrease?Solve by Formula. Three years ago, ABC Company issued 10-year bonds that pay 5% semiannually. a. If the bond currently sells for $1,045, what is the yield to maturity (YTM) on this bond? b. If you are expecting that the interest rate will drop in the near future and you want to gain profit by speculating on a bond, will you buy or sell this bond? Why?