a. Many years ago, Castles in the Sand Incorporated issued bonds at face value at a yield to maturity of 8.8%. Now, with 7 years left until the maturity of the bonds, the company has run into hard times and the yield to maturity on the bonds has increased to 14% What is now the price of the bond? (Assume semiannual coupon payments) Note: Do not round intermediate calculations. Round your answer to 2 decimal places. Bond price $ Yield to maturity 777.01 b. Suppose that investors believe that Castles can make good on the promised coupon payments but that the company will go bankrupt when the bond matures and the principal comes due. The expectation is that investors will receive only 86% of face value at maturity. If they buy the bond today, what yield to maturity do they expect to receive? Note: Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.

a. Many years ago, Castles in the Sand Incorporated issued bonds at face value at a yield to maturity of 8.8%. Now, with 7 years left until the maturity of the bonds, the company has run into hard times and the yield to maturity on the bonds has increased to 14% What is now the price of the bond? (Assume semiannual coupon payments) Note: Do not round intermediate calculations. Round your answer to 2 decimal places. Bond price $ Yield to maturity 777.01 b. Suppose that investors believe that Castles can make good on the promised coupon payments but that the company will go bankrupt when the bond matures and the principal comes due. The expectation is that investors will receive only 86% of face value at maturity. If they buy the bond today, what yield to maturity do they expect to receive? Note: Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.

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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O'Brien Ltd.'s outstanding bonds have a $1,000 par value, and they mature in 20 years. Their nominal annual, not semiannual yield to maturity is 7.75%, they pay interest semiannually, and they sell at a price of $700. What is the bond's nominal coupon interest rate? Do not round your intermediate calculations. a. 4.77% b. 2.39% c. 2.30% d. 4.41% e. 4.60%
Problem: A company has issued three bonds (Par Value S1,000) with the following data: What happends to the bond prices as each bond approaches the maturity date? (assume similar bonds with 15 year maturity sell for 10% coupon rate and that this rate stays const. over time) Market rate 10% 5-years ago 10-years ago 25 year bond Issue date Maturity Coupon rate Coupon Payment Today 15 year bond 10% 20 year bond 7% 13% 70 100 130 15 15 15 Positive Values Positive Values Positive Values 6. 8. 9. 10 11 12 13 14
2. Below is a list of five $1,000 par value zero-coupon bonds. Bond Years to Maturity Yield to Maturity A 1 5.00% B 2 6.00% C 3 7.00% D 4 8.00% E 5 9.00% 1) What is the forward 1-year interest rate four years from now? 2) If liquidity premiums are ignored, at what price shall bond C sell for one year from now? (keep two decimals in the final answer) 3) If your investment horizon is three years and you plan to invest in a bond that allows your position free from interest rate risk, which bond would you buy? What risks do you still face in this investment?
a. Many years ago, Castles in the Sand Incorporated issued bonds at face value at a yield to maturity of 5.8%. Now, with 5 years left until the maturity of the bonds, the company has run into hard times and the yield to maturity on the bonds has increased to 15%. What is now the price of the bond? (Assume semiannual coupon payments.) Note: Do not round intermediate calculations. Round your answer to 2 decimal places. Bond price b. Suppose that investors believe that Castles can make good on the promised coupon payments but that the company will go bankrupt when the bond matures and the principal comes due. The expectation is that investors will receive only 85% of face value at maturity. If they buy the bond today, what yield to maturity do they expect to receive? Note: Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. Yield to maturity %
Wildhorse Corp. has 18-year bonds outstanding. These bonds, which pay interest semiannually, have a coupon rate of 9.875 percent and a yield to maturity of 6.0 percent. Assume face value is $1,000. Problem 8.30(a) Your answer is incorrect. Compute the current price of these bonds. (Round answer to 2 decimal places, e.g. 15.25.) Current price $ EA
Please help me with these questions. Please don't use excel
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A newly issued 20-year-maturity, zero-coupon bond is issued with a yield to maturity of 8.7% and face value $1,000. Required: Find the imputed interest income in the first, second, and last years of the bond's life. (Do not round intermediate calculations. Round your answers to 2 decimal places.) Answer is not complete. Imputed Interest First year Second year Last year $ 87.00 X
An insurance company is analyzing the following three bonds, each with five years to maturity, annual interest payments, and is using duration as its measure of interest rate risk. What is the duration of each of the three bonds? (Do not round intermediate calculations. Round your answers to 2 decimal places. (e.g., 32.16)) a. $10,000 par value, coupon rate=9.7%, r 0.17 b. $10,000 par value, coupon rate 11.7%, r= 0.17 c. $10,000 par value, coupon rate = 13.7%, p=0.17 Duration of the bond years
Lance Whittingham IV specializes in buying deep discount bonds. These represent bonds that are trading at well below par value. He has his eye on a bond issued by the Leisure Time Corporation. The $1,000 par value bond with semiannual payments has 5 percent annual interest and has 20 years remaining to maturity. The current yield to maturity on similar bonds is 14 percent. (Round "PV Factor" to 3 decimal places. Do not round Intermediate calculations. Round the final answers to 2 decimal places.) a. What is the current price of the bonds? Use Appendix B and Appendix D. Current price 530.78 b. By what percent will the price of the bonds increase between now and maturity? Price increases by 88.40 % c. What is the annual compound rate of growth in the value of the bonds? (Use Appendix A) Annual compound rate 4.63 %
a. Many years ago, Castles in the Sand Incorporated issued bonds at face value at a yield to maturity of 8.6%. Now, with 7 years left until the maturity of the bonds, the company has run into hard times and the yield to maturity on the bonds has increased to 15%. What is now the price of the bond? (Assume semiannual coupon payments.) Note: Do not round intermediate calculations. Round your answer to 2 decimal places. Bond price b. Suppose that investors believe that Castles can make good on the promised coupon payments but that the company will go bankrupt when the bond matures and the principal comes due. The expectation is that investors will receive only 80% of face value at maturity. If they buy the bond today, what yield to maturity do they expect to receive? Note: Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. Yield to maturity %
The following table lists several corporate bonds. Treat these as zero coupon bonds, as in Example 2. Company AT&T LA Time to Maturity (years) 10 Annual Compound 2.97 Interest Rate (%) Bank of General Goldman America Electric Sachs 10 3.42 2 6.12 3 5.81 Verizon 8 5.41 Wells Fargo 7 4.18 If you bought AT&T bonds with a maturity value of $12,000, how much did you originally pay? (Round your answer to the nearest $1.)

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