You'd like to buy a 25-year, noncallable bond with an annual coupon rate of 8.4% paid semi-annually. The bond has a par value of $1,000. If you require an 6.35% nominal yield to maturity on this investment, what shouldyou be willing to pay for the bond? Oa. $1044.66. b. $1071.34 O c. $1255.19. d. $1012.53 0 e. $1184.27

Bond Price-The bond price is calculated as the current value of these bonds' future cash flows:…

Answered: ou'd like to buy a 25-year, noncallable…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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✪ 1. (10) Wine and Roses, Inc. offers an 7 percent coupon bond with semiannual payments and a yield to maturity of 5 percent. The bond matures in 30 years. a. What is the market price of a $1,000 face value bond? b. What is the current yield of the bond? c. Suppose that the bond will make a coupon payment in 35 days and an owner of this bond is contemplating to sell it. What is the accrued interest the seller is entitled to receive in this case? Assume 30 days/month
# 2 Assume a par value of $1,000. Caspian Sea plans to issue a 8.00 year, semi-annual pay bond that has a coupon rate of 7.97%. If the yield to maturity for the bond is 8.18%, what will the price of the bond be? Submit Answer format: Currency: Round to: 2 decimal places. unanswered not_submitted Attempts Remaining: Infinity
Baghiben
1.Piotr buys a 10 year, $50,000.00 face value, r(2) = 1.500% coupon bond. The bond yield is j(365) = 7.750%. What is the price of the bond? a. $29,563.60. b. $28,155.81. c. $30,126.72. d. $29,282.04. e. $28,437.37.
7. Liability payments of 200,000 each are due in 3 and 5 years from now. You can buy A of a 1-year zero coupon bond and B of a five-year zero coupon bond, both at a yield of 4%. Find A and B if the bond cash-flow is to immunize the liability cash-flow. Answer: A - 92, 456, B- 308, 160
Ma1.
A4) Why C?
7. Liability payments of 200,000 each are due in 3 and 5 years from now. You can buy A of a 1-year zero coupon bond and B of a five-year zero coupon bond, both at a yield of 4%. Find A and B if the bond cash-flow is to immunize the liability cash-flow. Answer: A В 3 308, 160 92, 456, B =
B
Part B: At t=0, you purchase a four-year, 5 percent coupon bond (paid annually) that is priced to yield 6 percent continuously compounded (YTM = 6% continuously compounded). The face value of the bond is $1,000. The bond issuer is the U.S. government (no liquidity risk). You are also given that your holding period (investment horizon) equals to 3.70 years (t=T=3.70 years). Suppose that the market interest rate changes to 5.50 percent continuously compounded during the first year of your purchase (within year 1), and it remains at that level for the remaining life of the bond. Assume that, the reinvestment rate for the first coupon payment is the new interest rate that is, 5.50 percent continuously compounded. In addition, you will reinvest the coupor payments in a zero-coupon bond. What is your continuously compounded Holding Period Return of your investment at the end of your investment horizon (t=3.70) years? (Round-off to four decimal places, to obtain as accurate answer as possible…
a. b. C. Problem 9.4: R & J, Inc. issues a 10-year $1,000 bond that pays $28.50 semi-annually. The market price for the bond is $975. The market's required yield to maturity on a comparable-risk bond is 6 percent. a. What is the value of the bond to you?. b. What happens to the value if the market's yield to maturity on a comparable-risk bond (i) increases to 8 percent or (ii) decreases to 4 percent? c. Under which of the circumstances in parts a & b should you purchase the bond? Years Par (FV) PMT Nper m Comparable risk (Rate) Bond value (PV) Comparable risk (Rate) Bond value (PV) Comparable risk (Rate) Bond value (PV)
17. A coupon bond is reported as having an ask price of 108% of the $1000 par value in the wall street journal. if the previous interest payment was made one month ago and the coupoon rate is 9% the invoice price of the bond will be ________________. a. $1087.5 b. $1110.10 c. $1150.00 d. $1160.25 3. none of these is correct

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