a. An 8 ½%, 25-year, $1,000 bond is presently selling at a yield-to-maturity (YTM) of 9 4%. Assuming annual interest payments, what should you pay for the bond? b. What should you pay if interest is paid semiannually? c. Instead of a 25-year bond, they decide to issue 15-year bonds with annual payments. What should you pay for this bond if the YTM is 9 4%? Explain the differences in prices changes for (3a) and (3c) in terms of maturity. d. You buy an 8%, 15-year, $1,000 bond that pays interest annually when it is selling with a YTM of 7%. Immediately after you buy the bond, the YTM increases to 9%. What was the percentage change in the price of the bond? A bond has a market price that exceeds its face value. What type of bond is this? Describe the relationship between the coupon rate and the YTM. е.
a. An 8 ½%, 25-year, $1,000 bond is presently selling at a yield-to-maturity (YTM) of 9 4%. Assuming annual interest payments, what should you pay for the bond? b. What should you pay if interest is paid semiannually? c. Instead of a 25-year bond, they decide to issue 15-year bonds with annual payments. What should you pay for this bond if the YTM is 9 4%? Explain the differences in prices changes for (3a) and (3c) in terms of maturity. d. You buy an 8%, 15-year, $1,000 bond that pays interest annually when it is selling with a YTM of 7%. Immediately after you buy the bond, the YTM increases to 9%. What was the percentage change in the price of the bond? A bond has a market price that exceeds its face value. What type of bond is this? Describe the relationship between the coupon rate and the YTM. е.
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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please solve using formula not excel. thank you
Transcribed Image Text:a. An 8 ½%, 25-year, $1,000 bond is presently selling at a yield-to-maturity (YTM)
of 9 4%. Assuming annual interest payments, what should you pay for the bond?
b. What should you pay if interest is paid semiannually?
c. Instead of a 25-year bond, they decide to issue 15-year bonds with annual
payments. What should you pay for this bond if the YTM is 9 4%? Explain the
differences in prices changes for (3a) and (3c) in terms of maturity.
d. You buy an 8%, 15-year, $1,000 bond that pays interest annually when it is
selling with a YTM of 7%. Immediately after you buy the bond, the YTM
increases to 9%. What was the percentage change in the price of the bond?
A bond has a market price that exceeds its face value. What type of bond is this?
Describe the relationship between the coupon rate and the YTM.
е.
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