Bond value and time Changing required returns Personal Finance Problem Lymn Parsons is considering investing in either of two outstanding bonds. The bonds both have$1,000 par values and 12% coupon interest rates and pay annual interest. Bond A has exactly 6 years to maturity, and bond 8 has 16 years to maturitya. Calculate the present value of bond A if the required rate of return is (1) 9%, (2) 12 %, and (3) 15%.b. Calculate the present value of bond 8 if the required rate of retum is: (1) 9%, (2) 12%, and (3) 15%c. From your findings in parts a and b, discuss the relationship between time to maturity and changing required retumsd. If Lynn wanted to minimize interest rate risk, which bond should she purchase? Why?COa (1) The value of bond A, if the required retum is 916, is $ (Round to the nearest cont.)

Bonds are debt instruments issued by companies. The company that issues a bond pays periodic coupons…

Bond value and time Changing required returns Personal Finance Problem Lynn Parsons is considering investing in either of two outstanding bonds. The bonds both have $1,000 par values and 12% coupon interest rates and pay annual interest. Bond A has exactly 6 years to maturity, and bond B has 16 years to maturity & Calculate the present value of bond A if the required rate of retum is: (1) 9%, (2) 12%, and (3) 15% b. Calculate the present value of bond B if the required rate of retum is: (1) 9%, (2) 12%, and (3) 15% c. From your findings in parts a and b, discuss the relationship between time to maturity and changing required Netums d. If Lynn wanted to minimize interest rate risk, which bond should she purchase? Why? a (1) The value of bond A it the required retum is 916, is $(Round to the nearest cont.)

Bond value and time Changing required returns Personal Finance Problem Lynn Parsons is considering investing in either of two outstanding bonds. The bonds both have $1,000 par values and 12% coupon interest rates and pay annual interest. Bond A has exactly 6 years to maturity, and bond B has 16 years to maturity & Calculate the present value of bond A if the required rate of retum is: (1) 9%, (2) 12%, and (3) 15% b. Calculate the present value of bond B if the required rate of retum is: (1) 9%, (2) 12%, and (3) 15% c. From your findings in parts a and b, discuss the relationship between time to maturity and changing required Netums d. If Lynn wanted to minimize interest rate risk, which bond should she purchase? Why? a (1) The value of bond A it the required retum is 916, is $(Round to the nearest cont.)

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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Similar questions

An investment firm recommends that a client invest in bonds rated AAA, A, and B. The average yield on AAA bonds is 4%, on A bonds 6%, and on B bonds 11%. The client wants to invest twice as much in AAA bonds as in B bonds. How much should be invested in each type of bond if the total investment is $28,000, and the investor wants an annual return of $1,740 on the three investments? Question content area bottom Part 1 The client should invest $enter your response here in AAA bonds, $enter your response here in A bonds, and $enter your response here in B bonds
If investors holding our 4-year bonds (Bond #1) receive interest income annually forfour years, plus the face value of the bonds at maturity,a. If the expected rate of return on our bonds is 10%, what is the duration ofBond #1? Given the following projected income stream for Bond #1: year coupon interest face value 1 100 2 100 3 100 4 100 1,000 total income in yeear 4 400 1,000
Please solve it in excel with Formulas explanation
User You are considering buying bonds in ACBB, Inc. The bonds have a par value of $1,000 and mature in 14 years. The annual coupon rate is 14.0% and the coupon payments are annual. The bond are currently selling $799.68 based on a yield to maturity of 18%. What is the bond expected capital gain/loss if the bond are held maturity’s ?
solution
3. You own several bonds and as an astute investor, you keep track of your interest payments (also known as coupon payments or cash flows). Annually, you receive a fixed total of interest payments of $2,000 per year from these bonds for the next 5 years and your required rate of return is 7.5%. What is the current value of your bond investment? Show your work and explain your answer.
How much should an investor be willing to pay now for 10%, P 50, 000.00 bond that will mature in 25 years and pays interest semi-annually, if it wants to make 12% nominal interest compounded semi-annually on a bond investment Given: Required: Solution: refer to this textbook: https://drive.google.com/file/d/1h4ra80IE8IRtYyja16iK6TtjCrTDi73j/view?usp=sharing
A short question 4) You are managing a portfolio of $1 million. Your target duration is 10 years, and you can choose from two bonds: a zero-coupon bond with maturity of 5 years, and a perpetuity*, each currently yielding 5%. a. How much of each bond will you hold in your portfolio? b. How will these ratios change next year if target duration is now 9 years? *: Perpetuity: a specal case of annuity, where n-> Inf, thus the maturity of the instrument is perpetual.

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