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$1,000 par value bond was issued 25 years ago at a 12 percent coupon rate. It currently has 15 years remaining to maturity terest rates on similar obligations are now 10 percent. Assume Ms. Bright bought the bond three years ago when it had a p 1,080. Further assume Ms. Bright paid 30 percent of the purchase price in cash and borrowed the rest (known as buying on hargin). She used the interest payments from the bond to cover the interest costs on the loan. . What is the current price of the bond? Use Table 16-2. (Input your answer to 2 decimal places.) Price of the bond

$1,000 par value bond was issued 25 years ago at a 12 percent coupon rate. It currently has 15 years remaining to maturity terest rates on similar obligations are now 10 percent. Assume Ms. Bright bought the bond three years ago when it had a p 1,080. Further assume Ms. Bright paid 30 percent of the purchase price in cash and borrowed the rest (known as buying on hargin). She used the interest payments from the bond to cover the interest costs on the loan. . What is the current price of the bond? Use Table 16-2. (Input your answer to 2 decimal places.) Price of the bond

Essentials Of Investments
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 was issued 25 years ago at a 12 percent coupon rate. It currently has 15 years remaining to maturity. Interest rates on similar obligations are now 10 percent. Assume Ms. Bright bought the bond three years ago when it had a price of $1,080. Further assume Ms. Bright paid 30 percent of the purchase price in cash and borrowed the rest (known as buying on margin). She used the interest payments from the bond to cover the interest costs on the loan. a. What is the current price of the bond? Use Table 16-2. (Input your answer to 2 decimal places.) Price of the bond b. What is her dollar profit based on the bond's current price? (Do not round intermediate calculations and round your answer to 2 decimal places.) Dollar profit
Transcribed Image Text:A $1,000 par value bond was issued 25 years ago at a 12 percent coupon rate. It currently has 15 years remaining to maturity. Interest rates on similar obligations are now 10 percent. Assume Ms. Bright bought the bond three years ago when it had a price of $1,080. Further assume Ms. Bright paid 30 percent of the purchase price in cash and borrowed the rest (known as buying on margin). She used the interest payments from the bond to cover the interest costs on the loan. a. What is the current price of the bond? Use Table 16-2. (Input your answer to 2 decimal places.) Price of the bond b. What is her dollar profit based on the bond's current price? (Do not round intermediate calculations and round your answer to 2 decimal places.) Dollar profit
c. How much of the purchase price of $1,080 did Ms. Bright pay in cash? (Do not round intermediate calculations and round your answer to 2 decimal places.) Purchase price paid in cash d. What is Ms. Bright's percentage return on her cash investment? Divide the answer to part b by the answer to part c. (Do not round intermediate calculations. Input your answer as a percent rounded to 2 decimal places.) Percentage return %
Transcribed Image Text:c. How much of the purchase price of $1,080 did Ms. Bright pay in cash? (Do not round intermediate calculations and round your answer to 2 decimal places.) Purchase price paid in cash d. What is Ms. Bright's percentage return on her cash investment? Divide the answer to part b by the answer to part c. (Do not round intermediate calculations. Input your answer as a percent rounded to 2 decimal places.) Percentage return %
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