An investor purchased a 14-year 5% semiannual coupons bond with face amount $100 that is callable on any coupon date in the 9th to 14th years: (i) In the 9th to 12th year, the bond is callable at redemption amount of $104. (ii) In the 13th and 14th year, the bond is callable at redemption amount of $109. The highest price this investor should pay in order to ensure a minimum nominal annual rate of interest of 6% convertible semiannually is: A 92.63 B 95.84 C 101.45 D 94.55 E 93.50

An investor purchased a 14-year 5% semiannual coupons bond with face amount $100 that is callable on any coupon date in the 9th to 14th years: (i) In the 9th to 12th year, the bond is callable at redemption amount of $104. (ii) In the 13th and 14th year, the bond is callable at redemption amount of $109. The highest price this investor should pay in order to ensure a minimum nominal annual rate of interest of 6% convertible semiannually is: A 92.63 B 95.84 C 101.45 D 94.55 E 93.50

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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Company I issues a $40,000,000 bond on January 1, 2020 with a coupon rate of 7%. The present value of the bond is $37,282,062 and the market rate of interest was 8%. The bond has a 10-year life and will make semiannual interest payments and will use the straight line amortization method. A) Is the bond issued at a face value, a discount, or premium? B) What is the amount of the semi-annual interest payments? C) What is the amount that will be recorded to interest expense each time an interest payment is made? D) What is the carrying value of the bond on December 31, 2021?
An investor wishes to sell a 20 year, 4%, $40,000 bond that will mature in 9 years. The bond pays interest semiannually. What will be the annual ROR (nominal) and the annual ROR effective for the buyer if the bond sells for $35,500? ROR (nominal) two decimal places = ROR (effective) two decimal places =
Two 20-year maturity mortgage-backed bonds are issued. The first bond has a par value of $10,000 and promises to pay a 9.5 percent annual coupon, while the second is a zero coupon bond that promises to pay $10,000 (par) after 20 years, with interest accruing at 9.0 percent. At issue, bond market investors require a 11.0 percent interest rate on both bonds. Required: a. What is the initial price on each bond? b. Now assume that both bonds promise interest at 9.5 percent, compounded semiannually. What will be the initial price for each bond? c. If market interest rates fall to 8.5 percent at the end of the fifth year, what will be the value of each bond, assuming annual payments as in (a) (state both as a percentage of par value and actual dollar value)?
An investor currently buys a bond maturing in three years, which has a nominal value of 1,000 euros and an issue rate of 3.5%. Coupons are paid once a year. Bonds with the same characteristics as the above bond offer bondholders yields at maturity of 4.5%. Requested: (a) Calculate the purchase price of the bond. (b) Calculate the duration of the Macaulay of the confession. (c) To find the change in the price of the bond which will result from a reduction in interest rates from 4.5% to 4.0%, using the modified maturity. What will be the newprice of the bond?
Toby purchased a 15-year par value bond with semiannual coupons of 3.5 and a redemption value of 110. The bond can be called at 120 on any coupon date prior to maturity, starting at the end of year 10. Calculate the maximum price of the bond to guarantee that Toby will earn an annual nominal interest rate of at least 8% convertible semiannually. O a. 102 O b. 99 O c. 97 d. 105 O e. 94
The Sisyphean Company has a bond outstanding with a face value of $5,000 that reaches maturity in 8 years. The bond certificate indicates that the stated coupon rate for this bond is 8.9% and that the coupon payments are to be made semiannually. Assuming the appropriate YTM on the Sisyphean bond is 10.7%, then the price that this bond trades for will be closest to: A. $4,524 Your answer is correct. B. $3,619 C. $6,334 D. $5,429
The Sisyphean Company has a bond outstanding with a face value of $1000 that reaches maturity in 9 years. The bond certificate indicates that the stated coupon rate for this bond is 5%and that the coupon payments are to be made semiannually. Assuming the appropriate YTM on the Sisyphean bond is 7.3%, then the price of this bond will be: The price of the bond is: $ (round to two decimal places)
The Sisyphean Company has a bond outstanding with a face value of $1,000 that reaches maturity in 8 years. The bond certificate indicates that the stated coupon rate for this bond is 9.8% and that the coupon payments are to be made semiannually. Assuming the appropriate YTM on the Sisyphean bond is 7.2%, then the price that this bond trades for will be closest to: A. $1,387 B. $1,618 O C. $1,156 D. $925
The Saleemi Corporation's $1,000 bonds pay 6 percent interest annually and have 14 years until maturity. You can purchase the bond for $1,085. Should you purchase the bond if the yield to maturity on a comparable-risk bond is 7 percent?
A three-year, 1000 dollars, 6 percent bond with semiannual coupons has redemption amount 1,040 dollars. Make amortization tables for this bond if it is bought to yield a nominal rate of 4 percent convertible semiannually.
Bones Ely owns a $1,000 face-value bond with three years to maturity. The bond makes annual interest payments of$75, the first to be made one year from today. The bond is currently priced at $975.48. Given an appropriate discount rate of 10%, should Bones hold or sell the bond?

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