Problem #4: A corporation issues a 20 year bond with the final redemption value equal to the face value of $1000, and semiannual coupons of 11.5%. However, the bond is callable at the end of 10 years at $1100, and at the end of 15 years at $1040. What is the price of the bond if the investor's yield (the "yield-to-worst") is 8.5%? Problem = 4: Answer correct to 2 decimals.

Problem #4: A corporation issues a 20 year bond with the final redemption value equal to the face value of $1000, and semiannual coupons of 11.5%. However, the bond is callable at the end of 10 years at $1100, and at the end of 15 years at $1040. What is the price of the bond if the investor's yield (the "yield-to-worst") is 8.5%? Problem = 4: Answer correct to 2 decimals.

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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f1. Subject:- Finance
✪ 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
Subject:- finance
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6
Accounting 1. How to calculate the value of a 6 year 2% coupon bond with semiannual payments, 1000 par. Expected return is the risk free rate of 3%. Please use 5 decimal places in your response 2. You buy a 6 year bond with an annual 5% coupon at par value, $1000. If the yield to maturity at the end of the first year changes to 3% what is the end of the year value of the bond(after the coupon payment, remember: bond value does not include this coupon)? Please use 5 decimal places in your response
Savita
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
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 =
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…
Your firm has issued 15-year zero-coupon bonds with a $1000 face value. If the bonds are currently selling for $585, what is the annual yield to maturity, assuming semiannual compounding? O A. 2.77% O B. 3.61% OC. This question cannot be answered because there is no coupon payment provided. O D. 1.80%
Fixed Income Securities4. Today is t = 0. You have just bought a five-year zero-coupon Treasurybond with $100 face value. You paid $80.(a) What is the annually compounded yield to maturity on the bond?(b) Suppose that yields at all maturities decrease to 2% immediately after you havepurchased the bond. Calculate the annualized holding period return if you sellthe bond one year after you have purchased it, at t = 1.(c) What is the annually compounded yield to maturity on the bond at t = 1?

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