Calculate the price of a 10 year, $1000 par value bond that makes semiannual payments, has a coupon rate of 12%. Calculate the price using a yield to maturity of 13% and illustrate it on a timeline. Is the bond traded at premium, par or discount?

Calculate the price of a 10 year, $1000 par value bond that makes semiannual payments, has a coupon rate of 12%. Calculate the price using a yield to maturity of 13% and illustrate it on a timeline. Is the bond traded at premium, par or discount?

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

See similar textbooks

Related questions

Q: Assume coupons are paid annually. Here are the prices of three bonds with 10-year maturities. Assume…

A: A bond is a fixed-income security that offers the investor a fixed set of periodic payments to the…

Q: Find the current yield of a 9%, 30-year bond that's currently priced in the market at $1,050. Now,…

A: Instead of financial calculator Microsoft excel is used to calculations. Working note:

Q: a. Is this bond currently trading at a discount, at par, or at a premium? Explain. (Select the best…

A: The bond functions similarly to a certificate of debt. The value of that certificate, should you…

Q: (Click on the following icon in order to copy its contents into a spreadsheet.) Years to Yield to…

A: using excel rate function to calculate YTM of the bonds

Q: Suppose a ten-year, $1,000 bond with an 8.9% coupon rate and se a. What is the bond's yield to…

A: We need to use RATE function in Excel to calculate yield to maturity of bond.. The equation is:…

Q: Consider a bond with a principal of $1,000 that pays a coupon of $100 per year. If the bond matures…

A: Bond: It is a fixed income instrument that represents a loan made by an investor to a borrower. We…

Q: A bond's credit rating provides a guide to its price. Assume Aaa bonds yield 3.6% and Baa bonds…

A: Aaa Bond Yield = ra = 3.6%Bbb Bond Yield = rb = 4.6%Coupon rate = 10%Time = t = 5 yearsFace Value =…

Q: Assume a 2 year, 5 year, 10 year and 30 year bond all pay a coupon rate of 4%. Test how the bond…

A: Bonds are debt instruments issued by companies. They pay periodic coupons or interests to the bond…

Q: Suppose a ten-year, $1,000 bond with an 8.0% coupon rate and semiannual coupons is trading for…

A: A bond is a type of financial instrument that an organization issues to investors to raise money for…

Q: Suppose a 10-year, $1,000 bond with an 8.9% coupon rate and semi-annual coupons is trading for a…

A: Compound = Semiannually = 2Time = t = 10 * 2 = 20Face Value = fv = $1000Coupon Rate = c = 8.9 / 2 =…

Q: What is the coupon rate for a bond with a face value of $1,000, 8 years to maturity, a current price…

A: Data given:: Face value =$1000 n=8 years Current price = $914 Yield to maturity = 8% Assumed…

Q: Suppose a 10-year, $1,000 bond with a 8% coupon rate and semiannual co a. What is the bond's yield…

A: Yield to maturity is the rate of return realized when bond is held till maturity and all cash flows…

Q: Assume coupons are paid annually. Here are the prices of three bonds with 10-year maturities. Assume…

A: Yield to Maturity (YTM) is a financial term used in the context of fixed-income securities, such as…

Q: Thebond shown in the following table pays interest annually. Par value Coupon interest rate Years…

A: Bond issuers and investors both need to consider the yield to maturity. YTM is used by investors to…

Q: Suppose a seven-year, $1,000 bond with an 8.1% coupon rate and semiannual coupons is trading with a…

A: a) Yield to maturity (YTM) of the bond is the rate which investors will earn if the bond is held…

Q: Consider the following risk-free bonds available for sale in the bond market (assume annual…

A: The term structure of interest rates: Also known as the yield curve, the term structure of interest…

Q: Suppose a ten-year, $1,000 bond with an 8.8% coupon rate and semiannual coupons is trading for…

A: Here, Par value of bond (FV) is $ 1000 Coupon rate is 8.8% Semi annual coupon amount (PMT)is:…

Q: If a bond's yield to maturity does not change, the return on the bond each year will be equal to the…

A: The yield to maturity calculates a bond's annualized return on investment by taking into account…

Q: Suppose a ten-year, $1,000 bond with an 8.3% coupon rate and semiannual coupons is trading for…

A: Price of bond is present value of coupon payment present value of par value of the bond based on…

Q: What is the price of the bond? b. If the rate of interest increases 1 percent, what will be the…

A: NOTE: As per our policy, we only answer up to three sub-questions. Therefore the first three…

Q: suppose a 30 year, pay coupon of 4% is priced to yield 5%. par = 1000. the bond pays its coupon…

A: Par value = 1000 Coupon rate = 4% Coupon amount = 1000*0.04 = 40 Yield = 5% Years to maturity = 30…

Q: Suppose a ten-year, $1,000 bond with an 8.6% coupon rate and semiannual coupons is trading for…

A: Solution:-Bond price means the price at which a bond should trade in the market. It is the summation…

Q: Consider a 25-year bond with a face value of $1,000 that has a coupon rate of 5.9%, with semiannual…

A: A bond is a fixed income security offering a defined set of periodic payments to the investor till…

Q: Suppose a seven-year, $1,000 bond with a 7.7% coupon rate and semiannual coupons maturity of 6.66%.…

A: Bonds serve as an important source of financing for organizations and provide investors with a…

Q: a. What was the price of this bond when it was issued? The price of this bond when it was issued was…

A: Information Provided: Years to maturity = 10 Face value = $1000 Coupon rate = 10% Yield to Maturity…

Q: Compute the price of a 5.0 percent coupon bond with 10 years left to maturity and a market interest…

A: Price of the bond can be defined as the present or current value of all future cash flows or coupon…

Q: Consider a semi-annual bond that has a par value of 100, a 15-year maturity, a 5% coupon rate.…

A: Note: As per our guidelines, we can only answer three subparts at once. Please post other subparts…

Q: |(Click on the following icon 9 in order to copy its contents into a spreadsheet.) Years to Yield to…

A: using excel rate function to calculate YTM multiplying YTM and nper by 2 since semi annual coupon…

Q: Assuming annual interest payments and a principal value of $100, what is the value of a 5-year 6.4%…

A: A bond is a debt security representing a loan made by an investor to a government or corporation,…

Q: Suppose a ten-year, $1,000 bond with an 8.9% coupon rate and semiannual coupons is trading for…

A: Bonds can be referred to as debt security that can be issued to raise funds from investors and for…

Q: Suppose a 10-year, $1,000 bond with an 8.0% coupon rate and semi-annual coupons is trading for a…

A: A bond is a kind of debt security issued by the government and private companies to the public for…

Q: Prepare a duration table for a coupon bond using the following assumptions: a. $100,000 par value…

A: Duration of bond - it measures the risk of change in price of bond due to change in interest rate in…

Q: You purchase a bond with a $100, 000 face value. a. The bond has a semi annual coupon of $3,880 and…

A: A bond is a fixed-income security that offers the investor a fixed set of periodic payments and…

Q: Assume that a RMI,000 par value bond has a coupon rate of 5% and will mature in 10 years. It has a…

A: In the security market analysis, the bond valuation refers to the determination of bond current…

Q: Assume that a bond will make payments every six months as shown on the following timeline (using…

A: Bonds are debt instrument issued by companies. The company that issues the bonds pay regular coupons…

Q: Suppose a bond with a 12% coupon rate and semiannual coupons, has a face value of $1,000, 10 years…

A: Bonds are a type of debt security that allows governments, corporations, and other organizations to…

Q: Consider a coupon bond that has a par value of $900 and a coupon rate of 6%. The bond is currently…

A: YTM is also known as Yield to maturity. It is a capital budgeting technique which helps in decision…

Q: Calculate the current yield on the described bond. A $500 Treasury bond with a coupon rate of 4.3%…

A: Current yield is a financial metric that represents the current income generated by an investment,…

Q: What is the price of a bond with a coupon rate of 7%, payable semi-annually, a face value of $1000,…

A: Current price of bond is the price which can be paid for purchase of the bond. It is also called…

Q: Suppose a ten-year, $1,000 bond with an 8.4% coupon rate and semiannual coupons is trading for…

A: Yield to maturity is the rate of return realized when bond is held for the expiration of bonds and…

Question

Calculate the price of a 10 year, $1000 par
value bond that makes semiannual
payments, has a coupon rate of 12%.
Calculate the price using a yield to
maturity of 13% and illustrate it on a
timeline. Is the bond traded at premium,
par or discount?

Expert Solution

Step 1: Given Information:

Here,

To Find:

Price of the bond (PV) =?

Trading at premium, par, or discount =?

Step by step

Solved in 3 steps with 6 images

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.

Similar questions

What is the duration of the following bond:$1,000par value,6%annual coupon, 4 years to maturity, and yield to maturity of6.5%? You will need your answer for the next question. In the prior question, what is the present value of the bond?
Suppose a 10-year, $1,000 bond with a coupon rate of 8.7% and semiannual coupons is trading for $1,034.73. a. What is the bond's yield to maturity (expressed as an APR with semiannual compounding)? b. If the bond's yield to maturity changes to 9.8% APR, what will be the bond's price? a. What is the bond's yield to maturity (expressed as an APR with semiannual compounding)? The bond's yield to maturity is 8.18%. (Round to two decimal places.) b. If the bond's yield to maturity changes to 9.8% APR, what will be the bond's price? The new price for the bond is: (Round to the nearest cent.)
Calculate the duration (and price) of a bond with the following characteristics: A semi-annual payment bond with a $1,000 face value, a 4,5% coupon rate, a 7.8% YTM, and 8 years to maturity. Show your table of calculations or show Excel inputs if using the Excel commands.
Calculate the duration (and price ) of a bond with the following characteristics: A semi - annual payment bond with a $1,000 face value, a 4.5% coupon rate, a 7.8% YTM, and 8 years to maturity. Show your table of calculations or show Excel inputs if using the Excel commands.
Consider a bond with semiannual interest payments that has a Settlement Date of 8/15/2020, a Maturity Date of 2/15/2031, a Coupon Rate of 5.00%, a Market Price of $975, a Face Value of $1,000, and a Required Return of 5.35%. What is the Macaulay Duration using the Duration function on these bonds expressed as a decimal calculated to two decimal places if you purchase them at the current market price? For example, if your answer is 12.345 then enter as 12.35 in the answer
Suppose a seven-year, $1,000 bond with a 7.7% coupon rate and semiannual coupons is trading with a yield to maturity of 6.51%. a. Is this bond currently trading at a discount, at par, or at a premium? Explain. b. If the yield to maturity of the bond rises to 7.38% (APR with semiannual compounding), what price will the bond trade for? a. Is this bond currently trading at a discount, at par, or at a premium? Explain. (Select the best choice below.) OA. Because the yield to maturity is less than the coupon rate, the bond is trading at a premium. B. Because the yield to maturity is greater than the coupon rate, the bond is trading at a premium. C. Because the yield to maturity is less than the coupon rate, the bond is trading at a discount. OD. Because the yield to maturity is greater than the coupon rate, the bond is trading at par.
Suppose a seven-year, $1,000 bond with a 7.97% coupon rate and semiannual coupons is trading with a yield to maturity of 5.53%. a. Is this bond currently trading at a discount, at par, or at a premuim? Explain. b. If the yield to maturity of the bond rises to 6.09% (APR with semiannual compounding), at what price will the bond trade?
Suppose a ten-year, $1,000 bond with an 8.1% coupon rate and semiannual coupons is trading for $1,034.23.
What is the yield to maturity on a bond that has a price of $1,700 and a coupon rate of 12% annually for 6 years at the end of which it repays the principal of $1000? Is the bond selling at premium, at par, or at discount? How can you tell? (Using financial calculator)
What is the market price of a bond if the face value is $1,000 and the yield to maturity is 5.7%? The bond has a 5.15% coupon rate and matures in 14 years. The bond pays interest semiannually. Please express answer as $X.XX or XX.XX and use rounding guideline included in "Course Information" module. Do not round until the final result.
Consider a 10-year bond with a face value of $1,000 that has a coupon rate of 5.8%, with semiannual payments.
You are given the following information on two traded bonds making semi-annual coupon payments. Bond Face Value Coupon Maturity Price A $1,000 3% 12 years $850.10 B $1,000 10% 12 years $970.00 Calculate Yield to Maturity (YTM) for bonds A and B.

SEE MORE QUESTIONS

Recommended textbooks for you

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

SEE MORE TEXTBOOKS