On January 1, 2023, ABC Corporation issued an 8% annual coupon bond. Each unit of the bondshas $1,000 par value and the bond will mature on January 1, 2048. Suppose you bought 1 unit ofABC bonds at its issuance.a) On January 1, 2034, how much did each unit of ABC bonds cost if the YTM is 12% on thatdate? b) Based on your purchase price on January 1, 2034, what is the current yield of ABC bond?c) Today is the end of March 2035. Suppose immediately after receiving the coupon on January 1, 2035, you sold the bond at 10% YTM. What was the capital gains yield of your bondinvestment from January 1, 2034 to January 1, 2035?

On January 1, 2023, ABC Corporation issued an 8% annual coupon bond. Each unit of the bondshas $1,000 par value and the bond will mature on January 1, 2048. Suppose you bought 1 unit ofABC bonds at its issuance.a) On January 1, 2034, how much did each unit of ABC bonds cost if the YTM is 12% on thatdate? b) Based on your purchase price on January 1, 2034, what is the current yield of ABC bond?c) Today is the end of March 2035. Suppose immediately after receiving the coupon on January 1, 2035, you sold the bond at 10% YTM. What was the capital gains yield of your bondinvestment from January 1, 2034 to January 1, 2035?

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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On March 1, Wayne Michaels bought 10 bonds from a particular company with a coupon rate of 9.625%. The purchase price was 89.875, and the commission was $8 per bond. Bonds from this particular company pay interest on February 1 and August 1. (a) What is the current yield (as a %) of the bond as of the purchase date? (Round your answer to one decimal place.) % (b) What is the total purchase price (in $) of the bonds? (Round your answer to the nearest cent.) $ (c) If Wayne sold the bonds on November 1 for 94.875, what are the proceeds (in $) from the sale? (Round your answer to the nearest cent.) $ Need Help? Read It
Calculate the purchase price of the $1,000 face value bond using the information given below. (Do not round the intermediate calculations. Round your final answer to 2 decimal places.) Issue date Dec 15, 2013 Maturity date Dec 15, 2043 Purchase date June 15, 2023 Coupon rate (%) Market rate (%) 5.00 6.4 Assume that • Bond interest is paid semiannually. . The bond was originally issued at its face value. Bonds are redeemed at their face value at maturity. • Market rates of return are compounded semiannually. Bond price
In January 2019, Cannon announced the issuance of a $1.2 billion bond. The bonds have a coupon rate of 6.0% payable semiannually. Assume the bonds have been assigned credit ratings of BBB (stable outlook) by Standard and Poor's, Baa2 (stable outlook) by Moody's, and BBB (stable outlook) by Fitch. Which of the following is true? Choose all that are correct. The coupon rate on these bonds would have been higher if Standard and Poor's, Moody's, and Fitch had assigned lower credit ratings. The periodic interest payment will be $36 million. The yield on these bonds would have been lower if Standard and Poor's, Moody's, and Fitch had assigned higher credit ratings. The periodic interest expense will depend on the bond's coupon rate.
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On March 1, Wayne Michaels bought 10 bonds from a particular company with a coupon rate of 9.625%. The purchase price was 89.875, and the commission was $8 per bond. Bonds from this particular company pay interest on February 1 and August 1. (a)What is the current yield (as a %) of the bond as of the purchase date? (Round your answer to one decimal place.) 10.7 % (b)What is the total purchase price (in $) of the bonds? (Round your answer to the nearest cent.) $ (c)If Wayne sold the bonds on November 1 for 94.875, what are the proceeds (in $) from the sale? (Round your answer to the nearest cent.) $
On March 1, Wayne Michaels bought 10 bonds from a particular company with a coupon rate of 9.325%. The purchase price was 89.875, and the commission was $7 per bond. Bonds from this particular company pay interest on February 1 and August 1. (a) What is the current yield (as a %) of the bond as of the purchase date? (Round your answer to one decimal place.) % (b) What is the total purchase price (in $) of the bonds? (Round your answer to the nearest cent.) $ (c) If Wayne sold the bonds on November 1 for 94.875, what are the proceeds (in $) from the sale? (Round your answer to the nearest cent.) $
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