An investor has two bonds in her portfolio, Bond C and Bond Z. Each bond matures in 4 years, has a face value of $1,000, and has a yield to maturity of 8.2%. Bond C pays a 11.5%annual coupon, while Bond Z is a zero coupon bond.a. Assuming that the yield to maturity of each bond remains at 8.2% over the next 4 years, calculate the price of the bonds at each of the following years to maturity. Roundyour answers to the nearest cent.Years to Maturity Price of Bond C Price of Bond Z$4321OT0$A AAAtAtA tA$A A

Answered: An investor has two bonds in her…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Consider two zero coupon bonds in which you receive $100 at the maturity date, one maturing in three years and one maturing in five years. Both are currently priced to yield 6 percent. Calculate the current market value of each bond.
What is the expected capital gains yield for each bond in each year? Round your answers to two decimal places. See attached format Bond A has a 9% annual coupon, matures in 12 years, and has a $1,000 face value. Bond B has a 10% annual coupon, matures in 12 years, and has a $1,000 face value. Bond C has an 8% annual coupon, matures in 12 years, and has a $1,000 face value. Each bond has a yield to maturity of 9%.
Consider a bond (with par value = $1,000) paying a coupon rate of 10% per year semiannually when the market interest rate is only 4% per half-year. The bond has three years until maturity. Required: a. Find the bond's price today and six months from now after the next coupon is paid. b. What is the total (6-month) rate of return on the bond? Complete this question by entering your answers in the tabs below. Required A Required B Find the bond's price today and six months from now after the next coupon is paid. Note: Round your answers to 2 decimal places. Current price Price after six months $ $ 1,052.42 1,044.52
A bond has just been issued. The bond has an annual coupon rate of 7% and coupons are paid annually. The bond has a face value of $1,000 and will mature in 7 years. The bond’s yield to maturity is 9%. Calculate the actual change in the bond’s price as the yield to maturity changes from 9% to 11%. Use the bond’s duration to calculate the approximate bond price change as the yield to maturity changes from 9% to 11%.
Suppose you purchase a ten-year bond with 12% annual coupons. You hold the bond for four years and sell it immediately after receiving the fourth coupon. If the bond's yield to maturity was 10.64% when you purchased and sold the bond, a. What cash flows will you pay and receive from your investment in the bond per $100 face value? b. What is the internal rate of return of your investment? Note: Assume annual compounding. a. What cash flows will you pay and receive from your investment in the bond per $100 face value? The cash flow at time 1-3 is $ (Round to the nearest cent. Enter a cash outflow as a negative number.) The cash outflow at time 0 is $ number.) (Round to the nearest cent. Enter a cash outflow as a negative The total cash flow at time 4 (after the fourth coupon) is $. (Round to the nearest cent. Enter a cash outflow as a negative number.) b. What is the internal rate of return of your investment? The internal rate of return of your investment is %. (Round to two decimal…
A bond has just been issued. The bond has an annual coupon rate of 4% and coupons are paid annually. The bond has a face value of $1,000 and will mature in 8 years. The bond’s yield to maturity is 8%. Create a table to demonstrate the impact of the coupon rate and the time to maturity on the bond’s duration using: Coupon Rates of 0%, 4%, 8%, and 12%. Maturities of 4 years, 8 years, and 12 years.
A $1,000 bond has a coupon of 8 percent and matures after eight years. Assume that the bond pays interest annually. What would be the bond's price if comparable debt yields 10 percent? Use Appendix B andAppendix D to answer the question. Round your answer to the nearest dollar. $ What would be the price if comparable debt yields 10 percent and the bond matures after four years? Use Appendix B and Appendix D to answer the question. Round your answer to the nearest dollar. $ Why are the prices different in a and b?The price of the bond in a is -Select-lessgreaterItem 3 than the price of the bond in b as the principal payment of the bond in a is -Select-further outcloserItem 4 than the principal payment of the bond in b (in time). 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 eight years: CY: %YTM: % The bond matures after four years: CY: %YTM: %
Suppose you purchase a $1,000 bond with a coupon rate of 8% matures in 5 years at par, and you plan to sell it at the end of 3 years at the prevailing market price. When you purchase the bond, your investment advisor predicts that similar bonds with 2 years to maturity yield at 6%. What is the expected yield to maturity on the bond?
An investor has two bonds in his portfolio that have a face value of $1,000 and pay an 11% annual coupon. Bond L matures in 16 years, while Bond S matures in 1 year. What will the value of the Bond L be if the going interest rate is 6%, 7%, and 12%? Assume that only one more interest payment is to be made on Bond S at its maturity and that 16 more payments are to be made on Bond L. Round your answers to the nearest cent.
Lynn Parsons is considering investing in either of two outstanding bonds. The bonds both have $1,000 par values and 11% coupon interest rates and pay annual interest. Bond A has exactly 10 years to maturity, and bond B has 20 years to maturity. a. Calculate the present value of bond A if the required rate of return is: (1) 8%, (2) 11%, and (3) 14%. b. Calculate the present value of bond B if the required rate of return is: (1) 8%, (2) 11%, and (3) 14%. c. From your findings in parts a and b, discuss the relationship between time to maturity and changing required returns. d. If Lynn wanted to minimize interest rate risk, which bond should she purchase? Why?

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