e. Mr. Clark is considering another bond, Bond D. It has a 9% semiannual coupon and a $1,000 face value (i.e., it pays a $45 coupon every 6 months). Bond D is scheduled to mature in 8 years and has a price of $1,170. It is also callable in 6 years at a call price of $1,030. 1. What is the bond's nominal yield to maturity? Round your answer to two decimal places. 9 % 2. What is the bond's nominal yield to call? Round your answer to two decimal places. 6.01 % 3. If Mr. Clark were to purchase this bond, would he be more likely to receive the yield to maturity or yield to call? Explain your answer. expect the bond to be called. Consequently, he would earn Because the YTM is the YTC, Mr. Clark

e. Mr. Clark is considering another bond, Bond D. It has a 9% semiannual coupon and a $1,000 face value (i.e., it pays a $45 coupon every 6 months). Bond D is scheduled to mature in 8 years and has a price of $1,170. It is also callable in 6 years at a call price of $1,030. 1. What is the bond's nominal yield to maturity? Round your answer to two decimal places. 9 % 2. What is the bond's nominal yield to call? Round your answer to two decimal places. 6.01 % 3. If Mr. Clark were to purchase this bond, would he be more likely to receive the yield to maturity or yield to call? Explain your answer. expect the bond to be called. Consequently, he would earn Because the YTM is the YTC, Mr. Clark

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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An investor has two bonds in his portfolio that have a face value of $1,000 and pay an 11% annual coupon. Bond Y matures in 19 years, while Bond A matures in 1 year. 1. What will the value of the Bond Ybe if the going interest rate is 7%, 8%, and 12%? Assume that only one more interest payment is to be made on Bond A at its maturity and that 19 more payments are to be made on Bond Y. Round your answers to the nearest cent.
A bond with a face value of P1,000 that will matures in 10 years. It pays a P50 coupon every year, and it can be called in 5 years at a call price of P1,200. The annual current yield of this bond is 4%. Determine the bond’s nominal yield to call. (In percentage, put percentage sign)
You are considering the purchase of a $1,000 par value bond with a coupon rate of 4.2% (with interest paid semiannually) that matures in 12 years. If the bond is priced to yield 8%, what is the bond's current price? The bond's current price is $. (Round to the nearest cent.)
An investor has two bonds in his portfolio that have a face value of $1,000 and pay a 12% annual coupon. Bond L matures in 15 years, while Bond S matures in 1 year. a. What will the value of the Bond L be if the going interest rate is 6%, 8%, and 13% ? Assume that only one more interest payment is to be made on Bond S at its maturity and that 15 more payments are to be made on Bond L. Round your answers to the nearest cent. 6% Bond L $ Bond S $ $ $ -Select- 8% $ $ 13% b. Why does the longer-term bond's price vary more than the price of the shorter-term bond when interest rates change? I. Long-term bonds have lower reinvestment rate risk than do short-term bonds. II. The change in price due to a change in the required rate of return increases as a bond's maturity decreases. III. Long-term bonds have greater interest rate risk than do short-term bonds. IV. The change in price due to a change in the required rate of return decreases as a bond's maturity increases. V. Long-term bonds have…
A $1,000 bond has a coupon of 4 percent and matures after tên years. ASsume that the bond pays interest annually. a. What would be the bond's price if comparable debt yields 6 percent? Use Appendix B and Appendix D to answer the question. Round your answer to the nearest dollar. $ b. What would be the price if comparable debt yields 6 percent and the bond matures after five years? Use Appendix B and Appendix D to answer the question. Round your answer to the nearest dollar. c. Why are the prices different in a and b? The price of the bond in a is -Select- v than the price of the bond in b as the principal payment of the bond in a is -Select- v than the principal payment of the bond in b (in time). d. 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 ten years: CY: % YTM: % The bond matures after five years: CY: YTM:
Bond A has a 6% coupon, paid semi-annually and is due in 2 years. It’s value is currently $ 900. Bond B has a 10% coupon, paid semi-annually and is due in 4 years. It is priced to yield 12%. Bond C is a zero-coupon bond priced to yield 11% in 8 years.
. Bond Valuation. Consider a bond that matures in 3 years. The face value of this bond is $1000. The bond pays semi-annual coupons at a rate of 8%. (a) Calculate the price of this bond, assuming the yield to maturity is 8.5% (b) Suppose you hold this bond for two years and then sell it just after receiving a coupon payment. At the time of the sale, the yield to maturity has fallen to 7.8%. Calculate the price of the bond at the time of the sale. (c) What is your total dollar value and percent return over the holding period?
The face value of a bond is $3000.00. The firm offering the bond pays 1% of the sales price to the selling agency and will pay $300.00 to the buyer every year. The bond matures in ten years and the firm pays $3000.00 to the buyer at the end of the tenth year. What is the effective rate of return on this bond to the firm offering it?
you are considering the purchase of a semiannual bond with a 9% coupon rate, it is trading at $875 and matures at $ 1000 in 25 years. What is the coupon payment on this bond?.
A $1,000 bond has a coupon of 8 percent and matures after eight years. Assume that the bond pays interest annually. What would be the bond's price if comparable debt yields 10 percent? Use Appendix B andAppendix D to answer the question. Round your answer to the nearest dollar. $ What would be the price if comparable debt yields 10 percent and the bond matures after four years? Use Appendix B and Appendix D to answer the question. Round your answer to the nearest dollar. $ Why are the prices different in a and b?The price of the bond in a is -Select-lessgreaterItem 3 than the price of the bond in b as the principal payment of the bond in a is -Select-further outcloserItem 4 than the principal payment of the bond in b (in time). 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 eight years: CY: %YTM: % The bond matures after four years: CY: %YTM: %
Consider the following bond: a 19-years $1,000 callable bond with 9 years until the next call date. The call price (the price the firm will need to pay bondholders if it uses its option to call the bond) on the bond is $1,050. The bond pays yearly coupons at a rate of 6.50% and the yield on the bond is 5.75%. Calculate the yield to call on this bond.
A bond pays a coupon of $35 semi-annually. The bond matures in 9 years and you will receive $1,000 at that time. If the required return is 9%, how much should you be willing to pay for the bond today? Round to 2 decimal places. Include a dollar sign ($) or percent (%) as appropriate. Answer

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