Each of the bonds shown below pays interest annually. Bond Par Value Coupon Years to Maturity Current Value A $1000 12% 15 B $500 10% 10 C $1000 13% 10 D $1000 8% 4 a) Calculate the yield to maturity (YTM) for each bond. C $850 $560 $1200 $900 b) What relationship exists between the coupon rate and yield to maturity and the par value and market value of a bond? Explain.

Each of the bonds shown below pays interest annually. Bond Par Value Coupon Years to Maturity Current Value A $1000 12% 15 B $500 10% 10 C $1000 13% 10 D $1000 8% 4 a) Calculate the yield to maturity (YTM) for each bond. C $850 $560 $1200 $900 b) What relationship exists between the coupon rate and yield to maturity and the par value and market value of a bond? Explain.

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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Use the method of averages to find the approximate yield rate for the bond with the following characteristics: Face value = $6000 Bond rate payable semi-annually = 7% Time before maturity: 7 years Market quotation = $102.75 NOTE: The bond is to be redeemed at par.
a. Find the price for the bond in the following table: (Round to the nearest cent.) Years to Maturity |O Data Table Par Value Coupon Rate $1,000.00 6% 15 (Click on the following icon e in order to copy its contents into a spreadsheet.) Years to Yield to Maturity Maturity Price Coupon Rate 6% Par Value $1,000.00 $5,000.00 $5,000.00 $1,000.00 15 8% 9% 9% 5% 10 5% 11% 15 10% Print Done
Yield to maturity The bond shown in the following table pays interest annually. (Click on the icon here in order to copy the contents of the data table below into a spreadsheet.) Par value $100 Coupon interest rate 14% Years to maturity 4 Current value $100 a. Calculate the yield to maturity (YTM) for the bond. b. What relationship exists between the coupon interest rate and yield to maturity and the par value and market value of a bond? Explain. a. The yield to maturity (YTM) for the bond is%. (Round to two decimal places.)
Based on the following information for a bond, what is the bond's coupon rate? (EXCEL EQUATION IF POSSIBLE) Years to maturity 25 Par value 1000 Interest rate 0.1 current price 1200 Coupon payments are made semiannually. a. .1108 b. .1082 c. .1331 d. .1219
Explain what you see from the pricing calculations. How do the two bonds differ? Bond C Bond Price = PV(rate,nper,pmt,fv) Given: n = Period which takes values from 0 to the nth period = 0,1,2,3 & 4 Cn = Coupon payment in the nth period = 10%*$1,000 = $100 YTM = interest rate or required yield = 9.6% P = Par Value of the bond = $1,000 Bond Z Bond Price = PV(rate,nper,pmt,fv) Given: n = Period which takes values from 0 to the nth period = 0,1,2,3 & 4 Cn = Coupon payment in the nth period = 0%*$1,000 = $0.00 YTM = interest rate or required yield = 9.6% P = Par Value of the bond = $1,000 years Bond A Bond Z 4 $1,012.79 $693.04 3 $1,010.02 $759.57 2 $1,006.98 $832.49 1 $1,003.65 $912.41 0 $1,000.00 $1,000.00
Explain why are the bond prices for A and B different or the same? Explain your answer clearly.
Assume the following: Bond A coupon = 6%, maturity = 5 years, yield to maturity = 6% Bond B coupon = 0%, maturity = 5 years, yield to maturity = 6% Bond C coupon = 6%, maturity = 5 years, yield to maturity = 6.5% Which of the following statements concerning duration is correct? Group of answer choices A. Duration of C<Duration of A=Duration of B. B. Duration of A>Duration of B>Duration of C. C. Duration of C < Duration of A < Duration of B. D. Duration of A< Duration of B<Duration of C.
What is the price of the bond given the information below. The bond makes semiannual interest payments. (Do not round intermediate calculations, round answer to two decimals, i.e. 32.16) Coupon Rate:8.5% YTM:9.5% Maturity (years):8 Par value: $2,000
Please answer 6D.
Please see attached. Definitions: Coupon is the regular interest payment of a bond. Coupon rate is the interest rate for the bond coupons, expressed in annual percentage terms. Par value is the principal amount to be repaid at the maturity of the bond. Yield to maturity (YTM) is the return the bond holder receives on the bond if held to maturity. Maturity date is the expiration date of the bond on which the final interest payment is made as well as the principal repayment.
What is the fair market value of a bond with the following features: (1) par value of $1000, (2) coupon payment of $45 and (3) 10-year maturity? Assume that current interest rates are 4%. $1040.55 $1000.00 $918.89 $1110.00
(a) Compute the market price (Vb) of the following bonds: (6)$1,000 par value, 10-yr maturity, and 8% coupon rate that is paid semi-annually? Assume the yield to maturity of 12%.$1,000 par value, 10-yr maturity, and 6% coupon rate that is paid semi-annually? Assume the yield to maturity of 12%.$1,000 par value, 10-yr maturity, and 8% coupon rate that is paid semi-annually? Assume the yield to maturity of 6%.(b) Based on your answers comment on the relationship (what happens to one variable when the other goes up/down) of (a) price with yield to maturity and (b) price with coupon rate. (4)

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