Mary is considering buying a four-year bond with coupon rate of 5%, face value $100 and annual coupons. What is the price of the four-year bond if according to the zero-coupon yield curve (assume all rates are EARS), the one-year spot rate is 4.3% the two-year spot rate is 3.6% the three-year spot rate is 3.4% the four-year spot rate is 3.0% Answer in $ and include two decimal places.

Mary is considering buying a four-year bond with coupon rate of 5%, face value $100 and annual coupons. What is the price of the four-year bond if according to the zero-coupon yield curve (assume all rates are EARS), the one-year spot rate is 4.3% the two-year spot rate is 3.6% the three-year spot rate is 3.4% the four-year spot rate is 3.0% Answer in $ and include two decimal places.

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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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.
Please show work You want to purchase a bond that will pay you $300 per year for the next four years. If the annual interest rate is 4%, then what is the price of your bond if the market is in equilibrium? You buy a stock that is expected to pay a dividend of $300 per year for the next four years. If the discount rate is 5.5%, then what is the stock price in this case? Is this result the one you would expect when comparing this answer to the one you obtained in question 3? Why or why not?
Nikul
Assume that you are considering the purchase of a 30-year, noncallable bond with an annual coupon rate of 9.0%. The bond has a face value of $1,000, and it makes semiannual interest payments. If you require an 9.0% nominal yield to maturity on this investment, what is the maximum price you should be willing to pay for the bond?
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