Problem 8 Coupon Bond. Coupon bond is a popular financial instrument. Here is the deal: A coupon bonds of face value F and maturity date N years from now with payment P per year will pay you P Baht per years for N years. Then at last payment you will also get F Baht. For example, if you buy today a coupon bond of face value F = 10 Million Baht with maturity date N = 3 years from now with payment of P = 10,000 Baht. You will get 10K one year from now, then two years from now, then three years after you bought it. Then, at the end of the third year, along with the last 10K payment, you will also get 10Million Baht. The question is if the (yearly) interest rate is r how much should you pay for a coupon bonds of face value F with maturity date N years from now with payment of P baht per year?

Problem 8 Coupon Bond. Coupon bond is a popular financial instrument. Here is the deal: A coupon bonds of face value F and maturity date N years from now with payment P per year will pay you P Baht per years for N years. Then at last payment you will also get F Baht. For example, if you buy today a coupon bond of face value F = 10 Million Baht with maturity date N = 3 years from now with payment of P = 10,000 Baht. You will get 10K one year from now, then two years from now, then three years after you bought it. Then, at the end of the third year, along with the last 10K payment, you will also get 10Million Baht. The question is if the (yearly) interest rate is r how much should you pay for a coupon bonds of face value F with maturity date N years from now with payment of P baht per year?

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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A. (1) Suppose that you have a bond with a face value of $1,000 and a coupon rate of 8% for one year and that you buy another one after one year. What will be your gain if the interest rate increases up to 10%? (2) Suppose that the expectations theory is true and that you can buy a three-year bond with an interest rate of 6% or three consecutive one-year bonds with interest rates of 4%, 5%, and 6%. Which option would you choose to undertake? Why? (3) One-year T-bill rates over the next five years are expected to be 4%, 5%, 6%, 6.5%, and 8%. If five-year T-bonds are yielding 13%, what is the liquidity premium on this bond?
The YTM on a bond is the interest rate you earn on your investment if interest rates don't change. If you actually sell the bond before it matures, your realized return is. known as the holding period yield (HPY). (Round the final answers to 2 decimal places.) a. Suppose that today you buy an 9.5% annual coupon bond for $ 1,210. The bond has 19 years to maturity. What rate of return do you expect to earn on your investment? Expected rate of return % b-1. Two years from now, the YTM on your bond has declined by 1%, and you decide to sell. What price will your bond sell for? (Omit $ sign in your response.) Bond price $ b-2. What is the HPY on your investment? HPY%
Kindly solved all 3 parts Q1 a) The market price of a 10-year bond is 979$, its yield to maturity is 8% per year, and annual coupon payments are equal to 979$. The face value of the bond is $t000. Calculate the present value of the bond. Would you buy it? Round your answer to the nearest tenth. b) Boeing recently issued bonds with a maturity of 10 years. The coupon rate is 12% but coupon payments will be paid quarterly. The par value is $1000 and the yield to maturity is equal to 8% compounded quarterly. Calculate the value of the bond today. Round your answer to the nearest tenth. c) Calculate the coupon payment of the bond that has 7 years till maturity, $1000 par value, 6% yield to maturity and it currently sells for $900? Round your answer to the nearest tenth.
Activity 2 XYZ Co. Ltd is considering investing in a bond currently selling for $8,800. The coupon rate is 8%. The bond has a face value of $10,000 and maturity of 4 years. The appropriate discount rate for bonds of this type is 10%. (i) What is the intrinsic value of the bond? Should the company buy the bond? (ii) What is the yield to maturity on this bond?
Consider a bond (with par value = $1,000) paying a coupon rate of 10% per year semiannually when the market interest rate is only 4% per half-year. The bond has three years until maturity. Required: a. Find the bond's price today and six months from now after the next coupon is paid. b. What is the total (6-month) rate of return on the bond? Complete this question by entering your answers in the tabs below. Required A Required B Find the bond's price today and six months from now after the next coupon is paid. Note: Round your answers to 2 decimal places. Current price Price after six months $ $ 1,052.42 1,044.52
Consider a bond with a current value of $928.01. It is a 10-year, $1,000 bond, coupons paid semi-annually, and has a 7% coupon rate. a. The bond's yield to maturity (YTM) is: b. What will be its value (per $1,000 of face) if its YTM changes to 10%? Question content area bottom Part 1 a. The YTM is enter your response here%. (Round to two decimal places.) b. Value (per $1,000 of face): $enter your response here. (Round to the nearest cent.)
Please use a financial calculator for accurate answers You currently own a bond with the following characteristics: Years to Maturity: 9 Face Value: $1,000 Coupon Rate: 8%/annum Market Return: 6%/annum Pays coupon semi-annually Calculate the present value of the bond: Another bond in the market has the following characteristics: Years to Maturity: 6 Face Value: $980 Coupon Rate: 6%/annum Market Return: 6%/annum Pays coupon semi-annually Should you sell your existing bond to purchase the second bond? Why/ why not?
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?
A short question 4) You are managing a portfolio of $1 million. Your target duration is 10 years, and you can choose from two bonds: a zero-coupon bond with maturity of 5 years, and a perpetuity*, each currently yielding 5%. a. How much of each bond will you hold in your portfolio? b. How will these ratios change next year if target duration is now 9 years? *: Perpetuity: a specal case of annuity, where n-> Inf, thus the maturity of the instrument is perpetual.
7. BCE bond has 10 years until maturity and a coupon rate of 8% payable annually, and sells for $1,100. a. If the BCE bond in problem 6 has a yield to maturity of 8% 1 year from now, what will its price be? (Round your answer to the nearest whole dollar.) b. What will be your rate of return if you buy it today and sell it in one year? (Round your answer to 2 decimal places. Use minus sign to enter negative rate of return, if any.) c. If the inflation rate during the year is 3%, what is the real rate of return on the bond? (Round your answer to 2 decimal places. Use minus sign to enter negative rate of return, if any.)
Suppose that a 1-year zero-coupon bond with face value $100 currently sells at $89.75, while a 2-year zero sells at $79.88. You are considering the purchase of a 2-year-maturity bond making annual coupon payments. The face value of the bond is $100, and the coupon rate is 10% per year. Required: What is the yield to maturity of the 2-year zero? What is the yield to maturity of the 2-year coupon bond? What is the forward rate for the second year? If the expectations hypothesis is accepted, what are (1) the expected price of the coupon bond at the end of the first year and (2) the expected holding-period return on the coupon bond over the first year? Will the expected rate of return be higher or lower if you accept the liquidity preference hypothesis?
The YTM on a bond is the interest rate you earn on your investment if interest rates don't change. If you actually sell the bon before it matures, your realized return is known as the holding period yield (HPY). a. Suppose that today you buy an annual coupon bond with a coupon rate of 8 percent for $815. The bond has 7 years to maturity and a par value of $1,000. What rate of return do you expect to earn on your investment? Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.1m b-1. Two years from now, the YTM on your bond has declined by 1 percent, and you decide to sell. What price will your bond sell for? Note: Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16. b-2. What is the HPY on your investment? Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.1 Answer is complete but not entirely correct. 12.00 %…

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