Lance Whittingham IV specializes in buying deep discount bonds. These represent bonds that are trading at well below par value. He has his eye on a bond issued by the Leisure Time Corporation. The $1,000 par value bond with semiannual payments has 4 percent annual interest and has 15 years remaining to maturity. The current yield to maturity on similar bonds is 10 percent. (Round "PV Factor" to 3 decimal places. Do not round intermediate calculations. Round the final answers to 2 decimal places.) a. What is the current price of the bonds? Use Appendix B and Appendix D. Current price b. By what percent will the price of the bonds increase between now and maturity? Price increases by |% c. What is the annual compound rate of growth in the value of the bonds? (Use Appendix A) Annual compound rate |%
Lance Whittingham IV specializes in buying deep discount bonds. These represent bonds that are trading at well below par value. He has his eye on a bond issued by the Leisure Time Corporation. The $1,000 par value bond with semiannual payments has 4 percent annual interest and has 15 years remaining to maturity. The current yield to maturity on similar bonds is 10 percent. (Round "PV Factor" to 3 decimal places. Do not round intermediate calculations. Round the final answers to 2 decimal places.) a. What is the current price of the bonds? Use Appendix B and Appendix D. Current price b. By what percent will the price of the bonds increase between now and maturity? Price increases by |% c. What is the annual compound rate of growth in the value of the bonds? (Use Appendix A) Annual compound rate |%
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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Transcribed Image Text:Lance Whittingham IV specializes in buying deep discount bonds. These represent bonds that are trading
at well below par value. He has his eye on a bond issued by the Leisure Time Corporation. The $1,000 par
value bond with semiannual payments has 4 percent annual interest and has 15 years remaining to
maturity. The current yield to maturity on similar bonds is 10 percent. (Round "PV Factor" to 3 decimal
places. Do not round intermediate calculations. Round the final answers to 2 decimal places.)
a. What is the current price of the bonds? Use Appendix B and Appendix D.
Current price
$
b. By what percent will the price of the bonds increase between now and maturity?
Price increases by
c. What is the annual compound rate of growth in the value of the bonds? (Use Appendix A)
Annual compound rate
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