(a) Find Sofia's minimal yield for the period she holds the bond. (b) If the bond is called prior to maturity, Sofia has made arrangements to have the redemption amount accumulate in her i = 5.5% savings account until the end of the eight years. What is her minimal yield for the eight-year period of the bond? (The coupons are not reinvested.)

(a) Find Sofia's minimal yield for the period she holds the bond. (b) If the bond is called prior to maturity, Sofia has made arrangements to have the redemption amount accumulate in her i = 5.5% savings account until the end of the eight years. What is her minimal yield for the eight-year period of the bond? (The coupons are not reinvested.)

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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Sofia purchases a $5,000 7% eight-year par-value bond with annual coupons. If held to maturity, her yield is 6.9%. The bond is callable at the end of two years for $5,300 and at the end of years five, six, and seven for $5,200. (a) Find Sofia's minimal yield for the period she holds the bond. (Round your answer to two decimal places.) % (b) If the bond is called prior to maturity, Sofia has made arrangements to have the redemption amount accumulate in her i = 5.1% savings account until the end of the eight years. What is her minimal yield for the eight-year period of the bond? (The coupons are not reinvested. Round your answer to two decimal places.) %
Quinn purchases a bond for $29,000 when the market interest rate is 13% per year, compounded semiannually. The bond has an interest rate of 10% per year payable semiannually and a maturity date of 24 years. What is the face value of this bond? (Hint: Solve for C = Z given Vy= $29,000)
A 3-year corporate bond is issued on 1/5/19 with a face value of $100 and a coupon of 2% pa (paid semi-annually with coupons paid on April 30 and October 31). On 2/7/19 Jessica buys this bond at a yield of 2% pa and she sells it on 28/8/19 at a yield of 2.4% pa. What has her annual return been?
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An Investor has two bonds in her portfollo, Bond C and Bond Z. Each bond matures in 4 years, has a face value of $1,000, and has a yield to maturity of 8.5%. Bond C pays a 11.5% annual coupon, while Bond Z is a zero coupon bond. a. Assuming that the yield to maturity of each bond remains at 8.5% over the next 4 years, calculate the price of the bonds at each of the following years to maturity. Round your answers to the nearest cent. Years to Maturity Price of Bond C Price of Bond Z 4 $ 1 0 $ $ $ $ $ -M $
Kai buys a 19 year callable bond with a coupon rate of 4.000% (nominal, semi-annual). The bond is callable at par on any coupon date starting at the end of year 15. Kai pays $31,626.64 and is guaranteed to earn a yield of at least 1.250% (nominal, semi-annual) on his investment. What is the face value F of the bond? O a. $23,000.00 O b. $25,300.00 O c. $18,850.00 O d. $23,450.00 Oe. $28,050.00 Javier buys a 25 year, $950,000.00 face value, 1.750% coupon bond. The bond is priced to yield r26) = 5.750%, and is secured by a sinking fund (set up by the issuer with semi-annual deposits), that earns 4.250% compounded quarterly. On default, Javier claims the balance in the sinking fund. How much does he lose if the issuer defaults after 24 years (just after making their coupon payment, and sinking fund deposit). O a. $22,011.08. O b. $18,535.65. Oc. $23,169.56. O d. $23,632.95. O e. $23,864.64.
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Nancy purchased a 15-year 1000 par value bond with semiannual coupons of 70. The bond can be called at 1150 on any coupon date prior to maturity, starting at the end of year 10. Calculate the maximum price of the bond to guarantee that Nancy will earn an annual nominal interest rate of at least 5% convertible semiannually.

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