(a) Two years after the bonds were issued (after the 4th coupon amount payments), the going rate of interest on bonds such as these fell to 8% (compounded semi-annually). At what price would the bonds sell? Sell price = $ (keep 2 decimal places) (b) Suppose that, two years after the bonds' issue (after the 4th coupon amount payments), the going interest rate had risen to 15% (compounded semi-annually). At what price would the bonds sell?
(a) Two years after the bonds were issued (after the 4th coupon amount payments), the going rate of interest on bonds such as these fell to 8% (compounded semi-annually). At what price would the bonds sell? Sell price = $ (keep 2 decimal places) (b) Suppose that, two years after the bonds' issue (after the 4th coupon amount payments), the going interest rate had risen to 15% (compounded semi-annually). At what price would the bonds sell?
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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Transcribed Image Text:Suppose Ford sold an issue of bonds with a 16-year maturity, a $1400 par
value, a 10% coupon rate, and semiannual interest payments (which are
determined by half of the coupon rate). Please use the factor formulae to
solve the questions below:
(a) Two years after the bonds were issued (after the 4th coupon amount
payments), the going rate of interest on bonds such as these fell to 8%
(compounded semi-annually). At what price would the bonds sell?
Sell price = $
(keep 2 decimal places)
(b) Suppose that, two years after the bonds' issue (after the 4th coupon
amount payments), the going interest rate had risen to 15%
(compounded semi-annually). At what price would the bonds sell?
Sell price = $
(keep 2 decimal places)
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