Coffee with a friend who loves to talk about investing. She explains that she just bought some bonds with 4.6% coupon rates, paid annually, and a yield-to-maturity of 5.8%. The bond issue matures in six years. Two questions here: What price did your friend pay? If your opportunity cost of investing funds is 7.0%, what is the maximum price you would pay for one of these bonds?

Coffee with a friend who loves to talk about investing. She explains that she just bought some bonds with 4.6% coupon rates, paid annually, and a yield-to-maturity of 5.8%. The bond issue matures in six years. Two questions here: What price did your friend pay? If your opportunity cost of investing funds is 7.0%, what is the maximum price you would pay for one of these bonds?

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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Pierre Dupont just received a cash gift from his grandfather. He plans to invest in a 5 year bond issued by Venice Corp. that pays an annual coupon rate of 5.5%. If the current market rate is 7.2%, what is the maximum amount Pierre should be willing to pay for this bond?
An investor has a cash of $29,379,685 at disposal. He wants to invest in a bond with $1,000 nominal value and whose dirty price is equal to 101.36%. What is the number of bonds he will buy? Round to the nearest integer. Blank Excel Worksheet Your Answer: Answer
Araya is hoping to make her first investment in bonds. She has found two bonds that have the same credit rating online and is now trying to calculate each bond's YTM. Both bonds mature in 15 years. Bond E has a coupon of 5% ; bond F has a coupon rate of 13%. Bond E is selling for $837. Bond F is selling for $391. Find the YTM for these bonds.
A manufacturer of video games develops a new game over two years. This costs $830,000 per year with one payment made immediately and the other at the end of two years. When the game is released, it is expected to make $1.40 million per year for three years after that. What is the net present value (NPV) of this decision if the cost of capital is 10%? A. $1,497,539 B. $2,586,658 C. $2,178,238 D. $1,361,399
I need the answer as soon as possible
answer both components PLEASE!
Mickey and Minnie just bought a zero coupon bond for $597.97, but they cannot recall when it matures. The yield to maturity equals 5.2%. Can you help Mickey and Minnie? The bond's face value is $1000. (Assume annual discounting) (Enter your answer in years and round to 2 decimal places.)
Latasha would like to invest a certain amount of money for two years and considers investing in a one-year bond that pays 5 percent and a two-year bond that pays 9 percent. Latasha is considering the following investment strategies: Strategy A: Buy a one-year bond that pays 5 percent and in year one, then buy another one-year bond that pays the forward rate in year two. Strategy B: Buy a two-year bond that pays 9 percent in year one and 9 percent year two. If the one-year bond purchased in year two pays 11 percent, and the liquidity premium on a two-year bond is 0.7 percent, Latasha will choose Strategy B Which of the following describes conditions under which Latasha would be indifferent between Strategy A and Strategy B? The rate on the one-year bond purchased in year two is 11.862 percent. The rate on the one-year bond purchased in year two is 12.486 percent. The rate on the one-year bond purchased in year two is 12.861 percent. The rate on the one-year bond purchased in year two is…
Ms. White has started her job and wanted to save her money in one way or other. But instead ofsaving money in the bank, she wished to invest it so that money could earn a return. She isintimidated by her friend's investment growth and decides to do the same. She decided topurchase a bond with face value $1,000. The annual coupon payment for the cond is 9%. Theinterest rate of the bond is 13% and maturity 2. She knew that the maturity levels and interestrate of the bond impact its price. So to test the same statement, she purchased 2 more bondswith the same specifications, except, one with maturity 2 and interest rate 10% while the otherwith maturity 3 and interest rate 13%. Determine the impact of change in the value of the bond.A: The bond selling price is $773.98 when interest rate decrease to 10% and $819.01 whenmaturity increases to 3.B: The bond selling price is $796.46 when interest rate decrease to 10% and $853.63 whenmaturity increases to 3.C: The bond selling price is $982.64…
An investor is considering purchasing a $1,000 bond with an 8% coupon rate. The bond was issued 7 years ago with a 30 year original maturity. If the investor requires a return of 7% based on the riskiness oft he bond, how much should she pay for the bond?
I want to answer this question

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