3. Three years ago you purchased a bond for $850 with an original maturity of 10 years, a coupon rateof 8% (paid annually), and a $1,000 par value. Back then your required return was 10%. Now, 3years later you want to sell the bond, but rates have increased and you can sell it for only $817.45.a.What is your holding period return (realized yield) over this 3-yr period? A timeline might help.b. Calculate the price of the bond 8 years after it was originally issued assuming the required returnon the bond at T-8 is 11%. HINT: Draw a timeline.

Price of bond is the present value of coupon payments plus present value of the par value of the…

Answered: hree years ago of 8% (paid ann years…

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hree years ago of 8% (paid ann years later you w 1. What is your Calculate the on the bond a

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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How much would you be prepared to pay for a $1,000 bond which comes due in 8 years and pays $100 interest annually assuming your required rate of return is 12% (pick closest answer)? a. $901 b. $1,032 c. $1,007 d. $962
Use the following tables to calculate the present value of a $608,000 @ 6%, 6-year bond that pays $36,480 interest annually, if the market rate of interest is 7%. Round to the nearest dollar. Present Value of $1 ¦ Present Value of Annuity of $1 Periods 5 % 6 % 7 % 10 % ¦ Periods 5 % 6 % 7 % 10 % 1 .95238 .94340 .93458 .90909 ¦ 1 .95238 .94340 .93458 .90909 2 .90703 .89000 .87344 .82645 ¦ 2 1.85941 1.83339 1.80802 1.73554 3 .86384 .83962 .81630 .75131 ¦ 3 2.72325 2.67301 2.62432 2.48685 4 .82270 .79209 .76290 .68301 ¦ 4 3.54595 3.46511 3.38721 3.16987 5 .78353 .74726 .71299 .62092 ¦ 5 4.32948 4.21236 4.10020 3.79079 6 .74622 .70496 .66634 .56447 ¦ 6 5.07569 4.91732 4.76654 4.35526 7 .71068 .66506 .62275 .51316 ¦ 7 5.78637 5.58238 5.38929 4.86842 8 .67684 .62741 .58201 .46651 ¦ 8 6.46321…
The stated rate is 5%; the market rate is 4%. The future value of Bonds payable is $1,000. When calculating the PV of the bonds what amount would you use as the annuity or annual payment? $40 $10 E $50 $90 $100
Dog
Suppose the current YTM on a 5-year T-Bond is 2.8% and the current YTM for a 1-year T-Bond is 0.75%. What is the 5-year term premium if the expected 1-year rates for thenext 4 years are 1.25%, 1.75%, 2.5%, and 3.25%?
What is the Macaulay duration of a $1 per year annuity-immediate payable for 10 years based on an annual interest rate of 5%? It can be calculated using the below formula, Macaulay Duration Formula t-C n-M + (1+y) (1+y) с Current Bond Price Macaulay Duration tx C + Macaulay = Duration Formula (1+ y) nxM (1+ y)n Current Bond Price 13
a. An 8 ½%, 25-year, $1,000 bond is presently selling at a yield-to-maturity (YTM) of 9 4%. Assuming annual interest payments, what should you pay for the bond? b. What should you pay if interest is paid semiannually? c. Instead of a 25-year bond, they decide to issue 15-year bonds with annual payments. What should you pay for this bond if the YTM is 9 4%? Explain the differences in prices changes for (3a) and (3c) in terms of maturity. d. You buy an 8%, 15-year, $1,000 bond that pays interest annually when it is selling with a YTM of 7%. Immediately after you buy the bond, the YTM increases to 9%. What was the percentage change in the price of the bond? A bond has a market price that exceeds its face value. What type of bond is this? Describe the relationship between the coupon rate and the YTM. е.
A bond has the following terms: Principal amount $1,000 Semi-annual interest $45 Maturity 15 years a. What is the bond's price if comparable debt yields 11%? b. What would be the price if comparable debt yields 11% and the bond matures after ten years? c. What would be the bond's price in a. and b. if interest rates declined to 8 % ?

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