A zero-coupon bond is a security that pays no interest, and is therefore bought at a substantial discount from its face value. If stated interest rates are 8% annually (with monthly compounding) how much would you pay today for a zero-coupon bond with a face value of $2,500 that matures in 6 years? Please round your answer to the nearest hundredth.

A zero-coupon bond is a security that pays no interest, and is therefore bought at a substantial discount from its face value. If stated interest rates are 8% annually (with monthly compounding) how much would you pay today for a zero-coupon bond with a face value of $2,500 that matures in 6 years? Please round your answer to the nearest hundredth.

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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A bond with 8 years to maturity has an annual coupon rate of 5.1% and pays interest semiannually. Assume that today we are 58 days into the current 183- day coupon payment period, and the required rate of return is 5.7%. What is the flat price that would be quoted by a dealer on this bond, per $100 of par value?
you observe that the current 1 - year treasury bill rate is 4% and estimate that it will be 4.6% in one year. your liquidity premium is .3% for holding a bond for 2 years. what is the minimum interest rate you would accept on a 2-year treasury note?
You are considering a 15-year, $1,000 par value bond. Its coupon rate is 10%, and interest is paid semiannually. If you require an "effective" annual interest rate (not a nominal rate) of 7.1225%, how much should you be willing to pay for the bond? Do not round intermediate calculations. Round your answer to the nearest cent.
A bond's market price is $700. It has a $1,000 par value, will mature in 6 years, and has a coupon interest rate of 11 percent annual interest, but makes its interest payments semiannually. What is the bond's yield to maturity? What happens to the bond's yield to maturity if the bond matures in 12years? What if it matures in 3 years?
You are considering a 30-year, $1,000 par value bond. Its coupon rate is 10%, and interest is paid semiannually. If you require an "effective" annual interest rate (not a nominal rate) of 9.2025%, how much should you be willing to pay for the bond? Do not round intermediate calculations. Round your answer to the nearest cent.
The one-year spot rate z1 = 5% and the forward price for a one-year zero-coupon bond beginning in one year is 0.9346. Find the spot price (zero price) of a two-year zero-coupon bond.
A 8-year zero-coupon bond has an interest rate of 7.7%. What is it worth today? show your work! Answer:
A $1,000 bond has a coupon of 4 percent and matures after tên years. ASsume that the bond pays interest annually. a. What would be the bond's price if comparable debt yields 6 percent? Use Appendix B and Appendix D to answer the question. Round your answer to the nearest dollar. $ b. What would be the price if comparable debt yields 6 percent and the bond matures after five years? Use Appendix B and Appendix D to answer the question. Round your answer to the nearest dollar. c. Why are the prices different in a and b? The price of the bond in a is -Select- v than the price of the bond in b as the principal payment of the bond in a is -Select- v than the principal payment of the bond in b (in time). d. What are the current yields and the yields to maturity in a and b? Round your answers to two decimal places. The bond matures after ten years: CY: % YTM: % The bond matures after five years: CY: YTM:
An insurance company is thinking about purchasing bonds A and B with zero coupons to cover some of its future liabilities. The redemption periods for these zero-coupon bonds are seven and twenty years, respectively.£11 million is due in 11 years, and £14 million is due in 16 years, according to the list of its liabilities.Determine bond B's value at an effective 5% annual interest rate so that Redington's theory of immunization's first two requirements are met. (correct answer=6.419) (using formulas, no tables)
A bond pays a coupon of $35 semi-annually. The bond matures in 9 years and you will receive $1,000 at that time. If the required return is 9%, how much should you be willing to pay for the bond today? Round to 2 decimal places. Include a dollar sign ($) or percent (%) as appropriate. Answer
You are considering buying a semi-annual coupon bond with a stated coupon rate of 8 % (note that the stated rate is in annual terms). There are 10 years to maturity remaining on it. Your required rate of return is 12.4 % per year, How much should you be willing to pay for this bond? (Round your answer to three decimal places. For example 1.23450 or 1.23463 will be rounded to 1.235 while 1.23448 will be rounded to 1.234).

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