(Bond valuation relationships) Arizona Public Utilities issued a bond that pays $70 in interest, with a $1,000 par value. It matures in 30 years. The market's required yield to maturity on a comparable-k bond is 8 percent a. Calculate the value of the bond b. How does the value change if the market's required yield to maturity on a comparable-risk bond () increases to 12 percent or (4) decreases to 7 percent? c. Explain the implications of your answers in part b as they relate to interest-rate risk, premium bonds, and discount bonds. d. Assume that the bond matures in 5 years instead of 30 years Recompute your answers in parts and b e. Explain the implications of your answers in part d as they relate to interest-rate risk, premium bonds, and discount bonds a. What is the value of the bond if the market's required yield to maturity on a comparable-risk bond is 8 percent? $ 887 42 (Round to the nearest cent) b.) What is the value of the bond if the market's required yield to maturity on a comparable-risk bond increases to 12 percent? (Round to the nearest cent)
(Bond valuation relationships) Arizona Public Utilities issued a bond that pays $70 in interest, with a $1,000 par value. It matures in 30 years. The market's required yield to maturity on a comparable-k bond is 8 percent a. Calculate the value of the bond b. How does the value change if the market's required yield to maturity on a comparable-risk bond () increases to 12 percent or (4) decreases to 7 percent? c. Explain the implications of your answers in part b as they relate to interest-rate risk, premium bonds, and discount bonds. d. Assume that the bond matures in 5 years instead of 30 years Recompute your answers in parts and b e. Explain the implications of your answers in part d as they relate to interest-rate risk, premium bonds, and discount bonds a. What is the value of the bond if the market's required yield to maturity on a comparable-risk bond is 8 percent? $ 887 42 (Round to the nearest cent) b.) What is the value of the bond if the market's required yield to maturity on a comparable-risk bond increases to 12 percent? (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
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Transcribed Image Text:(Bond valuation relationships) Arizona Public Uslities issued a bond that pays $70 in interest, with a $1,000 par value. It matures in 30 years. The market's required yield to maturity on a comparable-sk
bond is 8 percent.
a. Calculate the value of the bond.
b. How does the value change if the market's required yield to maturity on a comparable-risk bond (i) increases to 12 percent or (4) decreases to 7 percent?
c. Explain the implications of your answers in part b as they relate to interest-rate risk, premium bonds, and discount bonds.
d. Assume that the bond matures in 5 years instead of 30 years. Recompute your answers in parts a and b
e. Explain the implications of your answers in part d as they relate to interest-rate risk, premium bonds, and discount bonds.
GALLE
a. What is the value of the bond if the marker's required yield to maturity on a comparable-risk bond is 8 percent?
$ 887 42 (Round to the nearest cent.)
b. () What is the value of the bond if the market's required yield to maturity on a comparable-risk bond increases to 12 percent?
(Round to the nearest cent.)
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