a. Before calculating the prices of the bonds, indicate whether each bond is trading at a premium, at a discount, or at par. Bond A is selling at a premium because its coupon rate is greater than the going interest rate. Bond B is selling at a discount because its coupon rate is less than Bond C is selling at par because its coupon rate is equal to the going interest rate. the going interest rate. b. Calculate the price of each of the three bonds. Round your answers to the nearest cent. Price (Bond A): $ 1272.55 Price (Bond B): $ 727.45 Price (Bond C): $ 1000.00 c. Calculate the current yield for each of the three bonds. (Hint: The expected current yield is calculated as the annual interest divided by the price of the bond.) Round your answers to two decimal places. Current yield (Bond A): 11.00 % Current yield (Bond B): 8.25 % Current yield (Bond C): | 10.00 % d. If the yield to maturity for each bond remains at 10%, what will be the price of each bond 1 year from now? Round your answers to the nearest cent. Price (Bond A): $ 1527.06 Price (Bond B): $ 856.79 Price (Bond C): $ 1000.00 What is the expected capital gains yield for each bond? What is the expected total return for each bond? Round your answers to two decimal places. Expected capital gains yield Expected total return Bond A -1.00 Bond B % 1.75 % Bond C 0.00 % 10.00 % 10.00 % 10.00 %

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
Question

Please help with section d!!

a. Before calculating the prices of the bonds, indicate whether each bond is trading at a premium, at a discount, or at par.
Bond A is selling at a premium
because its coupon rate is greater than
the going interest rate.
Bond B is selling at a discount
because its coupon rate is less than
Bond C is selling at par
because its coupon rate is equal to
the going interest rate.
the going interest rate.
b. Calculate the price of each of the three bonds. Round your answers to the nearest cent.
Price (Bond A): $
1272.55
Price (Bond B): $
727.45
Price (Bond C): $
1000.00
c. Calculate the current yield for each of the three bonds. (Hint: The expected current yield is calculated as the annual interest divided by the price of the bond.) Round your answers to two decimal places.
Current yield (Bond A):
11.00
%
Current yield (Bond B):
8.25
%
Current yield (Bond C): |
10.00
%
d. If the yield to maturity for each bond remains at 10%, what will be the price of each bond 1 year from now? Round your answers to the nearest cent.
Price (Bond A): $
1527.06
Price (Bond B): $
856.79
Price (Bond C): $
1000.00
What is the expected capital gains yield for each bond? What is the expected total return for each bond? Round your answers to two decimal places.
Expected capital gains yield
Expected total return
Bond A
-1.00
Bond B
%
1.75
%
Bond C
0.00
%
10.00
%
10.00
%
10.00
%
Transcribed Image Text:a. Before calculating the prices of the bonds, indicate whether each bond is trading at a premium, at a discount, or at par. Bond A is selling at a premium because its coupon rate is greater than the going interest rate. Bond B is selling at a discount because its coupon rate is less than Bond C is selling at par because its coupon rate is equal to the going interest rate. the going interest rate. b. Calculate the price of each of the three bonds. Round your answers to the nearest cent. Price (Bond A): $ 1272.55 Price (Bond B): $ 727.45 Price (Bond C): $ 1000.00 c. Calculate the current yield for each of the three bonds. (Hint: The expected current yield is calculated as the annual interest divided by the price of the bond.) Round your answers to two decimal places. Current yield (Bond A): 11.00 % Current yield (Bond B): 8.25 % Current yield (Bond C): | 10.00 % d. If the yield to maturity for each bond remains at 10%, what will be the price of each bond 1 year from now? Round your answers to the nearest cent. Price (Bond A): $ 1527.06 Price (Bond B): $ 856.79 Price (Bond C): $ 1000.00 What is the expected capital gains yield for each bond? What is the expected total return for each bond? Round your answers to two decimal places. Expected capital gains yield Expected total return Bond A -1.00 Bond B % 1.75 % Bond C 0.00 % 10.00 % 10.00 % 10.00 %
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