(Bond valuation) Four years ago XYZ International issued some 27-year zero-coupon bonds that were priced with a market's required yield to maturity of 9 percent and a par value of $1,000. What did these bonds sell for when they were issued? Now that 4 years have passed and the market's required yield to maturity on these bonds has climbed to 11 percent, what are they selling for? If the market's required yield to maturity had fallen to 7 percent, what would they have been selling for? a. What did these bonds sell for when they were issued? (Round to the nearest cent)

(Bond valuation) Four years ago XYZ International issued some 27-year zero-coupon bonds that were priced with a market's required yield to maturity of 9 percent and a par value of $1,000. What did these bonds sell for when they were issued? Now that 4 years have passed and the market's required yield to maturity on these bonds has climbed to 11 percent, what are they selling for? If the market's required yield to maturity had fallen to 7 percent, what would they have been selling for? a. What did these bonds sell for when they were issued? (Round to the nearest cent)

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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BVA, Inc. has two bond issues outstanding, each with a par value of $1,000. Information about each is listed below. Suppose market interest rates rise 1 percentage point across the yield curve. What will be the change in price for each of the bonds? Does this tell us anything about the relationship between initial yield to maturity and interest rate risk? Bond A: 12 years to maturity, pays a 7 percent coupon, and the market interest rate on this BB-rated bond is 12.36 percent. Bond B: 12 years to maturity, pays a 7 percent coupon, and the market interest rate on this A-rated bond is 10.25 percent. Kindly providethe excel solution
Kindly assist on those questions. Bayside Corporation has $1000 par value non-callable bonds with 9 years left to maturity. These bonds have a stated fixed annual coupon rate of 6.5% ( with semi annual interest payments) a) what are these bonds worth today if the required market rate of return is 4% ? b) what is the relationship between the coupon rate, changes in the market rate and the value of t?
A firm has issued bonds with a remaining maturity of 1 year, face value of $100 and an annual coupon rate of 5% (there is only one coupon payment left, to be paid one year from now). You observe that the price of the bonds is $94. What is the yield on the bonds today? Suppose that investors expect a 4% return on other bonds with similar maturity and risk and forecast that if the bond defaults, bond holders will get paid 70% of the coupon payments and principal value they are owed (i.e., a 70% recovery rate). What is the expected cash flow of the bonds at time 1? What is the probability of default implied by current bond prices?
A corporate bond with a 7.600 percent coupon has 15 years left to maturity. It has had a credit rating of BB and a yield to maturity of 9.9 percent. The firm has recently become more financially stable and the rating agency is upgrading the bonds to BBB. The new appropriate discount rate will be 8.8 percent. (Assume interest payments are semiannual.) What will be the change in the bond's price in dollars? What will be the change in the percentage terms? Note: Do not round intermediate calculations. Round your final answer to 2 decimal places. Change in bond price $78.90 Change in bond percent %
A major manufacturer is reevaluating its bonds since it is planning to issue a new bond in the current market. The firm's outstanding bond issue has 7 years remaining till maturity. The bonds were issued with an 8 per cent coupon rate (paid quarterly) and a par value of $1,000. The required rate of return is 10 per cent. What is the current value of these securities?
(Expected rate of return and current yield) Citigroup issued bonds that pay a coupon interest rate of 7.5 percent. The bonds mature in 14 years. They are selling for $864. What would be your expected rate of return (yield to maturity) if you bought the bonds? What would the current yield be?
Yellow Inc. offers bonds with a coupon rate of 6%. The coupon paid annually and the market's required yield to maturity (YTM) is 8%. The par value of the bond is $800 and the bond matures in 5 years. a) What is the theoretical value of the bonds? b) Determine whether these bonds are traded at par, discount or premium! (We assume an efficient financial market.) There are no separators between thousands of magnitude: no spaces, no dots.
Four years ago, Vulcan Ltd. issued a 20-year $1000 par value bond that pays $40 semi-annual coupon payments. The annual required rate of return on these bonds today is 10 percent. a)Is this bond currently sell at par, discount or premium? Why? b)Normally, whether the yield to maturity (YTM) is expressed as annual percentage rate (APR) or effective annual rate (EAR)? c)What is the current bond price?
The Faulk Corp. has a 7 percent coupon bond outstanding. The Yoo Company has an 11 percent bond outstanding. Both bonds have 12 years to maturity, make semiannual payments, and have a YTM of 9 percent. If interest rates suddenly rise by 2 percent, what is the percentage change in the price of these bonds? What if interest rates suddenly fall by 2 percent instead? What does this problem tell you about the interest rate risk of lower coupon bonds
GrowthSec Ltd has raised $10M in debt funding by issuing 100 5 year bonds with a face value of $100,000 each. The bonds pay semi-annual coupons at 6% p.a. If the yield to maturity is 7% p.a., what will be the price of each bond? If after one year the bond is trading at a premium, what must have happened to market interest rates? Why has this impacted the bond price?
Mertol Corporation has 7-year, 1000t par value bonds that make semiannual coupon payments. The current yield-to-maturity on the bonds 22,45% and the bond currently sells for 673,99t. a. What is the annual coupon rate on the bond? b. What is the current yield of the bond? What is the expected capital gains yield tor the next year? c. What is the effective YTM an investor will earn on Mertol bonds?
Last year Carson Industries issued a 10-year, 13% semiannual coupon bondat its par value of $1,000. Currently, the bond can be called in 6 years at a price of $1,065and it sells for $1,200.a. What are the bond’s nominal yield to maturity and its nominal yield to call? Would aninvestor be more likely to earn the YTM or the YTC?b. What is the current yield? Is this yield affected by whether the bond is likely to be called?(Hint: Refer to footnote 6 for the definition of the current yield and to Table 7.1.)c. What is the expected capital gains (or loss) yield for the coming year? Is this yielddependent on whether the bond is expected to be called? Explain your answer.

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