END-OF-YEAR PAYMENTS Bond A 100 100 100+ 1,000 Year 1 Year 2 Year 3 Bond B 50 50 50+ 1,000 Bond C 0 0 0 + 1,000 Bond D 0 + 1,000 0 0 Consider the four bonds having annual payments as shown in Table 3.9. All of the onds have a 15% yield. Which bond has the highest price?

END-OF-YEAR PAYMENTS Bond A 100 100 100+ 1,000 Year 1 Year 2 Year 3 Bond B 50 50 50+ 1,000 Bond C 0 0 0 + 1,000 Bond D 0 + 1,000 0 0 Consider the four bonds having annual payments as shown in Table 3.9. All of the onds have a 15% yield. Which bond has the highest price?

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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Concept explainers

Bond Valuation

Bond valuation are the notes issued by the corporation to raise long-term funds for the business. The corporations are required to pay the interest on such liabilities at a specified rate of interest (termed as coupon rate) at specified dates which may be on semi-annual or annual basis. These interest payments may be in the form of coupons.

Question

TABLE 3.9
END-OF-YEAR PAYMENTS
Year 1
Year 2
Year 3
Bond B
Bond C
Bond A
Bond A
100
100
100 + 1,000
Consider the four bonds having annual payments as shown in Table 3.9. All of the
bonds have a 15% yield.
Which bond has the highest price?
Bond D
Bond B
50
50
50 + 1,000
Bond C
0
0
0 + 1,000
Bond D
0 + 1,000
0
0

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