Calculate the price of a bond originally issued six years ago that pays semiannual interest at the rate of 10 percent and matures in ten years at $3,000. The market currently requires an 8 percent return for a bond of this risk. (Use a Financial calculator to arrive at the answers. Do not round intermediate calculations. Round the final answer to 2 decimal places.) Price of a bond

Calculate the price of a bond originally issued six years ago that pays semiannual interest at the rate of 10 percent and matures in ten years at $3,000. The market currently requires an 8 percent return for a bond of this risk. (Use a Financial calculator to arrive at the answers. Do not round intermediate calculations. Round the final answer to 2 decimal places.) Price of a bond

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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A $1,000 par value bond has a 10 percent coupon, which is paid on a semiannual basis. It matures in either 2 years or 10 years. Current yields on similar bonds are either 8 percent or 12 percent. a. Calculate the price of the bond for the four possibilities. (Use a Financial calculator to arrive at the answers. Do not round intermediate calculations. Round the final answer to 2 decimal places.) Price of the bond 2 years 8 percent $ 2 years 12 percent $ 10 years 12 percent $ 10 years 8 percent $ b. What is the relationship between price and yield? Price and yield are directly/inversly related. c. What is the relationship between bond price changes and time to maturity? Bond prices change are more for longer terms/less for longer terms for a given yield change.
A firm specializes in buying deep discount bonds (i.e. bonds trading at well below par). The firm is eyeing a bond that pays 8% annual interest and has 17 years remaining to maturity. The bond is currently selling at 35% below par. Required: By what percent will the price of the bonds increase between now and maturity based on semi-annual analysis? Answer% Intermediate calculations must be rounded to 3 decimal places (at least). Input your answer as a percent rounded to 2 decimal places (for example: 28.31%).
A $1,000 bond has a coupon of 5 percent and matures after twelve years. Assume that the bond pays interest annually. What would be the bond's price if comparable debt yields 8 percent? Use Appendix B and Appendix D to answer the question. Round your answer to the nearest dollar. $ ____________ What would be the price if comparable debt yields 8 percent and the bond matures after six years? Use Appendix B and Appendix D to answer the question. Round your answer to the nearest dollar. $ _________--- What are the current yields and the yields to maturity in a and b? Round your answers to two decimal places. The bond matures after twelve years: CY: ______%YTM: _________ % The bond matures after six years: CY: _____ %YTM: _____ %
A $1,000 par value bond was issued five years ago at a 8 percent coupon rate. It currently has 25 years remaining to maturity. Interest rates on similar debt obligations are now 10 percent. Use Appendix B and Appendix D for an approximate answer but calculate your final answer using the formula and financial calculator methods. a. Compute the current price of the bond using an assumption of semiannual payments. Note: Do not round intermediate calculations and round your answer to 2 decimal places. Current bond price b. If Mr. Robinson initially bought the bond at par value, what is his percentage capital gain or loss? Note: Ignore any interest income received. Do not round intermediate calculations and round your answer to 2 decimal places. Percentage loss %
Find the duration of a bond with a settlement date of May 27, 2025, and maturity date November 15, 2036. The coupon rate of the bond is 6.0%, and the bond pays coupons semiannually. The bond is selling at a bond-equivalent yield to maturity of 8.0%. Use Spreadsheet 16.3. Note: Do not round intermediate calculations. Round your answers to 2 decimal places. X Answer is complete but not entirely correct. Macaulay duration Modified duration 11.98 X 11.52 X
What is the effective yield to maturity of a $1,000 par value strip bond that sells for $255 and will mature in 15 years? (Use a Financial calculator to arrive at the answer. Round the final answer to 2 decimal places.)
A Treasury bond that settles on October 18, 2019, matures on March 30, 2038. The coupon rate is 5.50 percent, and the bond has a yield to maturity of 4.73 percent. What are the Macaulay duration and modified duration? (Use the duration functions in Excel to solve the problem. Do not round intermediate calculations. Round your answers to 4 decimal places.) Macaulay duration Modified duration 12.0200
A Treasury bond that settles on October 18, 2019, matures on March 30, 2038. The coupon rate is 5.35 percent, and the bond has a yield to maturity of 4.52 percent. What are the Macaulay duration and modified duration? (Use the duration functions in Excel to solve the problem. Do not round intermediate calculations, Round your answers to 4 decimal places.) Answer is not complete. Macaulay duration Modified duration 12.2800
A Treasury bond that settles on October 18, 2019, matures on March 30, 2038. The coupon rate is 5.75 percent, and the bond has a yield to maturity of 5.08 percent. What are the Macaulay duration and modified duration? (Use the duration functions in Excel to solve the problem. Do not round intermediate calculations. Round your answers to 4 decimal places.) Macaulay duration Modified duration
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 that the prices of zero-coupon bonds with various maturities are given in the following table. The face value of each bond is $1,000. Maturity (Years) 1 2 3 4 5 Price $983.78 865.89 797.92 732.00 660.24 Required: a. Calculate the forward rate of interest for each year. b. How could you construct a 1-year forward loan beginning in year 3? c. How could you construct a 1-year forward loan beginning in year 4?
A General Power bond carries a coupon rate of 9.2%, has 9 years until maturity, and sells at a yield to maturity of 8.2%. (Assume annual interest payments.) a. What interest payments do bondholders receive each year? b. At what price does the bond sell? Note: Do not round intermediate calculations. Round your answer to 2 decimal places. c. What will happen to the bond price if the yield to maturity falls to 7.2%? Note: Do not round intermediate calculations. Round your answer to 2 decimal places. A a. Interest payments b. Price c. Price will by

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