Miller Corporation has a premium bond making semiannual payments. The bond has a coupon rate of 9 percent, a YTM of 7 percent, and 15 years to maturity. The Modigliani Company has a discount bond making semiannual payments. This bond has a coupon rate of 7 percent, a YTM of 9 percent, and also has 15 years to maturity. Both bonds have a par value of $1,000. a. What is the price of each bond today? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) b. If interest rates remain unchanged, what do you expect the price of these bonds to be 1 year from now? In 6 years? In 10 years? In 14 years? In 15 years? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) a. Price today b. Price in 1 year Price in 6 years Price in 10 years Price in 14 years Price in 15 years Miller Bond Modigliani Bond

Miller Corporation has a premium bond making semiannual payments. The bond has a coupon rate of 9 percent, a YTM of 7 percent, and 15 years to maturity. The Modigliani Company has a discount bond making semiannual payments. This bond has a coupon rate of 7 percent, a YTM of 9 percent, and also has 15 years to maturity. Both bonds have a par value of $1,000. a. What is the price of each bond today? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) b. If interest rates remain unchanged, what do you expect the price of these bonds to be 1 year from now? In 6 years? In 10 years? In 14 years? In 15 years? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) a. Price today b. Price in 1 year Price in 6 years Price in 10 years Price in 14 years Price in 15 years Miller Bond Modigliani Bond

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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Liom Corp. Has a $4,000 par value bond outstanding with a coupon rate of 4.6 percent paid semiannually and 20 years to maturity. The yield to maturity on this bond is 2.1 percent. What is the dollar price of the bond?
Dakota Corporation 15-year bonds have an equilibrium rate of return of 8 percent. For all securities, the inflation risk premium is 1.75 percent and the real risk-free rate is 3.50 percent. The security’s liquidity risk premium is 0.25 percent and maturity risk premium is 0.85 percent. The security has no special covenants. Calculate the bond’s default risk premium. (Round your answer to 2 decimal places.)
Volbeat Corporation has bonds on the market with 12.5 years to maturity, a YTM of 8 percent, and a current price of $980. The bond makes semiannual payments. What is the coupon rate?
Corporation's 10-year bonds have an equilibrium rate of return is 9.00 percent. For all securities, the inflation risk premium is 1.68 percent and the real interest rate is 3.18 percent. The security's liquidity risk premium is .33 percent and maturity risk premium is .88 percent. The security has no special covenants. What is the bond's default risk premium? A - 2.93% B - 11.71% C - 1.80% D - 6.07%
A BBB-rated corporate bond has a yield to maturity of 10.5%. A U.S. Treasury security has a yield to maturity of 9.0%. These yields are quoted as APRs with semiannual compounding. Both bonds pay semiannual coupons at an annual rate of 9.9% and have five years to maturity. a. What is the price (expressed as a percentage of the face value) of the Treasury bond? b. What is the price (expressed as a percentage of the face value) of the BBB-rated corporate bond? c. What is the credit spread on the BBB bonds?
ELECTRON Computers just issued a bond that matures in 8 years. Its par value is equal to $1,000 and its coupon rate is equal to 7.5%. Interest payments are made annually. The yield to maturity on the bond is 7%. a. This type of bond is called: OYield bond OCoupon bond ODiscount bond b. Calculate the value of the coupon payment. Coupon payment = $ c. Calculate the value of the bond today. Use two decimal places and report a positive number. VB = $
Bond X is a premium bond making semiannual payments. The bond pays a coupon rate of 7 percent, has a YTM of 5 percent, and has 13 years to maturity. Bond Y is a discount bond making semiannual payments. This bond pays a coupon rate of 5 percent, has a YTM of 7 percent, and also has 13 years to maturity. The bonds have a $1,000 par value. What is the price of each bond today? If interest rates remain unchanged, what do you expect the price of these bonds to be one year from now? In four years? In nine years? In 11 years? In 13 years?
(Related to Checkpoint 9.2 and Checkpoint 9.3) (Bond valuation relationships) The 14-year, $1,000 par value bonds of Waco Industries pay 6 percent interest annually. The market price of the bond is $1,105, and the market's required yield to maturity on a comparable-risk bond is 3 percent. a. Compute the bond's yield to maturity. b. Determine the value of the bond to you given the market's required yield to maturity on a comparable-risk bond. c. Should you purchase the bond? a. What is your yield to maturity on the Waco bonds given the current market price of the bonds? ☐ % (Round to two decimal places.)
McConnell Corporation has bonds on the market with 14 years to maturity, a YTM of 8.8 percent, a par value of $1,000, and a current price of $1,296.50. The bonds make semiannual payments. What must the coupon rate be on these bonds?
(Related to Checkpoint 9.2 and Checkpoint 9.3) (Bond valuation relationships) The 12-year, $1,000 par value bonds of Waco Industries pay 8 percent interest annually. The market price of the bond is $925, and the market's required yield to maturity on a comparable-risk bond is 11 percent. Compute the bond's yield to maturity. Determine the value of the bond to you given the market's required yield to maturity on a comparable-risk bond. Should you purchase the bond?
A BBB-rated corporate bond has a yield to maturity of 9.8%. A U.S. Treasury security has a yield to maturity of 8.4%. These yields are quoted as APRS with semiannual compounding. Both bonds pay semiannual coupons at an annual rate of 9.1% and have five years to maturity. a. What is the price (expressed as a percentage of the face value) of the Treasury bond? b. What is the price (expressed as a percentage of the face value) of the BBB-rated corporate bond? c. What is the credit spread on the BBB bonds? a. What is the price (expressed as a percentage of the face value) of the Treasury bond? The price of the Treasury security as a percentage of face value is ☐ %. (Round to two decimal places.)

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