Hannah is considering the purchase of a callable bond with a par value of $10,000 and a current market value of $11,250. The bond's coupon rate is 11.5% and there are five years left to maturity. The bond's call date is exactly two years from now. The bond includes a $500 financial enhancement if it is called prior to its maturity date. Calculate the bond's yield-to-call. A) 4.80% OB) 4.87% OC) 7.06% OD) 7.45%

Hannah is considering the purchase of a callable bond with a par value of $10,000 and a current market value of $11,250. The bond's coupon rate is 11.5% and there are five years left to maturity. The bond's call date is exactly two years from now. The bond includes a $500 financial enhancement if it is called prior to its maturity date. Calculate the bond's yield-to-call. A) 4.80% OB) 4.87% OC) 7.06% OD) 7.45%

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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Nancy Jackson is interested in buying a five-year zero coupon bond with a face value of $1,000. She understands that the market interest rate for similar investments is 9.1 percent. Assume annual coupon payments. What is the current value of this bond? (Round answer to 2 decimal places, e.g. 15.25.) Current value of bond $
Ruth Hornsby is looking to invest in a three-year bond that makes semiannual coupon payments at a rate of 11.86 percent. If these bonds have a market price of $907.28, what yield to maturity and effective annual yield can she expect to earn? (Round answer to 2 decimal places, e.g. 15.25%.) Yield to maturity % _______________ Effective annual yield % _______________
Your client is considering the purchase of a bond that is currently selling for $1058.15. The client wants to know what annual rate of return can they expect to earn on the bond. The bond has 27 years to maturity, pays a coupon rate of 7.8% (payments made semi-annually), and a face value of $1000, (Round to 100th of a percent and enter your answer as a percentage, e.g. 12.34 for 12.34%) Answer: Check
Claire Redfield is considering the purchase of a 20 year non-callable bond with a coupon rate of 8.50%. The bond has a face value of $1,000 and it makes SEMIANNUAL coupon payments. If the required yield to maturity on this investment is 7.20%, what is the maximum price that should be paid for this bond today? (Ch. 7) Group of answer choices $966.18 $1,079.85 $692.28 $1,136.68 $1,182.15
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1. We have the opportunity to buy a 10-year (original term) bond with 7 years of semi-annual coupon payments remaining. The annual coupon rate is set at 5% ($25 semi-annual payment). If the current Yield to Maturity (prevailing market rate on comparable bonds) is approximately 6.5%, estimate the appropriate purchase price of the bond.
Assume that you are considering the purchase of a 5-year, noncallable bond with an annual coupon rate of 8.00%. The bond has a face value of $1000, and it makes semiannual interest payments. If you require an 11.55% yield to maturity on this investment, what is the maximum price you should be willing to pay for the bond? Round your answer to two decimal places. For example, if your answer is $345.6671 round as 345.67 and if your answer is .05718 or 5.7182% round as 5.72.
Assume that you are considering the purchase of a 11-year, noncallable bond with an annual coupon rate of 8.90%. The bond has a face value of $1000, and it makes semiannual interest payments. If you require an 13.90% yield to maturity on this investment, what is the maximum price you should be willing to pay for the bond? Round your answer to two decimal places. For example, if your answer is $345.6671 round as 345.67 and if your answer is .05718 or 5.7182% round as 5.72.
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:
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Assume that you are considering the purchase an AEP 30-year, bond with an annual coupon rate of 8.22%. The bond has a face value of $1,000, and it makes semiannual interest payments. If you require an 11.45% yield to maturity on this investment, what is the maximum price you should be willing to pay for the bond? $824.55 $945.01 $904.47 891.25 $727.90

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