Do the Math 14-6 Yield, Price, and YTM A corporate bond maturing in 15 years with a coupon rate of 9.9 percent was purchased for $980 and it now selling for $1,030. a. What is its current yield? Round your answer to one decimal place. 9.4 $ % b. What will be its selling price in two years if comparable market interest rates drop 3.9 percentage points? (Hint: Use Appendix A-2 and Appendix A-4 or the Garman/Forgue companion website.) Round Present Value of a Single Amount and Present Value of Serie of Equal Amounts in intermediate calculations to four decimal places. Round your answer to the nearest cent. c. Calculate the bond's YTM using Equation 14.5 or the Garman/Forgue companion website. Round your answer to two decimal place %

Do the Math 14-6 Yield, Price, and YTM A corporate bond maturing in 15 years with a coupon rate of 9.9 percent was purchased for $980 and it now selling for $1,030. a. What is its current yield? Round your answer to one decimal place. 9.4 $ % b. What will be its selling price in two years if comparable market interest rates drop 3.9 percentage points? (Hint: Use Appendix A-2 and Appendix A-4 or the Garman/Forgue companion website.) Round Present Value of a Single Amount and Present Value of Serie of Equal Amounts in intermediate calculations to four decimal places. Round your answer to the nearest cent. c. Calculate the bond's YTM using Equation 14.5 or the Garman/Forgue companion website. Round your answer to two decimal place %

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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Give typing answer with explanation and conclusion O'Brien Ltd.'s outstanding bonds have a $1,000 par value, and they mature in 25 years. Their nominal annual, not semiannual yield to maturity is 9.25%, they pay interest semiannually, and they sell at a price of $700. What is the bond's nominal coupon interest rate? a.6.15% b.6.58% c.4.86% d.5.72% e.7.01%
Question 4 (i) What is the approximate annualized yield on a 6-month Treasury bill with a face value of $1000 that is sold at $970 in the primary market? (ii) A 5-year Treasury bond (TBOND1) is sold on the market one day at $1000 with an annual coupon of $60. The following day bad news hits the market and a new 5-year Treasury bond is sold on the market at an $80 annual coupon. What is the approximate new secondary market price of TBOND1? (iii) Write down an equation for the three main components of the nominal long term interest rate on a bond, clearly explaining what each symbol stands for.
What is the value of a Northern Pacific bond with an 11 percent coupon, maturing in 15 years? Assume the market rate for this bond is 14 percent and that the interest is paid semiannually. a. $790.74 b. $1,000.00 c. $813.50 d. $853.30
Sanity Check 1: Valuing Bond Issue ABS-CBN Corporation has issued bonds with coupon rate of 8%, P1000 par value, 20 years maturity. The bonds pay interest annually (at the end of each year) and market's required yield to maturity is 7%. At what price are you willing to pay to one of these bonds? STEP 1: Timing and Amount of cash flows STEP 2: Determine the YTM discount rate STEP 3: Compute for the PV of cash flows Bond Value = Interest (1 + YTM Market)" (1 + YTM starket) + Principal YTM Market
eBook Yield to Maturity and Yield to Call Amot International's bonds have a current market price of $1,250. The bonds have an 11% annual coupon payment, a $1,000 face value, and 10 years left until maturity. The bonds may be called in 5 years at 109% of face value (call price - $1,090). a. What is the yield to maturity? Round your answer to two decimal places. % b. What is the yield to call if they are called In 5 years? Round your answer to two decimal places. c. Which yield might investors expect to earn on these bonds, and why? I. Investors would not expect the bonds to be called and to earn the YTM because the YTM is greater than the YTC. II. Investors would not expect the bonds to be called and to earn the YTM because the YTM is less than the YTC. III. Investors would expect the bonds to be called and to earn the YTC because the YTC is less than the YTM. IV. Investors would expect the bonds to be called and to earn the YTC because the YTM is less than the YTC. -Select- d. The…
What is the last payment amount of a bond with 1 payment per years, Coupon Rate 8.50% and principal and $514,000 principal and matures in 10 years? Answer with two decimal digits accuracy. Example: 631062.50
Question 2 Assume the yield curve is flat shown as following table. A cash and $duration-neutral butterfly is to be constructed by selling one thousand 7-year coupon paying bonds and purchasing qs and ql coupon paying bonds with maturities 3 and 15 years respectively. More information on the bonds to be used in the strategy is given Note that we are assuming all bonds pay interest semi-annually. (a) Explain how to interpret the modified duration of -8.86 corresponding to the 15-year maturity bond. (b) Write down the system of equations that needs to be solved in order to find qs and ql and verify that the solution to this system is qs = 679.32 and ql =366.23. (c) Find the profit from this strategy if yield curve moves: (i) up to 8% pa and (ii) down to 5% pa. (d) Explain why in practice it may be difficult to profit from the cash and $duration neutral butterfly. (e) Explain the major differences between the 50-50 butterfly strategy and the cash and $duration neutral butterfly.
Multinational Finance & investment Q1 A five-year 2.4% defaultable coupon bond is selling to yield 3% (Annual Percent Rate and semi-annual compounding). The bond pays interest semi-annually. The risk-free yield is 2.4%. Therefore, its current credit spread is 3% - 2.4% = 0.6%. Two years later its credit spread increases from 0.6% to 1% while the risk-free yield doesn’t change. Assuming the face value of the coupon bond and risk-free bond is 100. b) If we define credit value as the difference between the prices of risk-free bond and defaultable bond, what is the current credit value of the bond, and what is it after two years?
Yield to Maturity and Current Yield You just purchased a bond that matures in 15 years. The bond has a face value of $1,000 and an 8% annual coupon. The bond has a current yield of 8.37%. What is the bond's yield to maturity? Do not round intermediate calculations. Round your answer to two decimal places. % Please advise on this question

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