Professor Snape invested in an outstanding bond with a 4% annual coupon and a remaining maturity of 10 years. The bond has a par value of $1,000 and the market interest rate is currently 8%. How much did Professor Snape pay for the bond?

Professor Snape invested in an outstanding bond with a 4% annual coupon and a remaining maturity of 10 years. The bond has a par value of $1,000 and the market interest rate is currently 8%. How much did Professor Snape pay for the 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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Similar questions

Toby purchased a 20-year bond which pays semiannual coupons of 8%. The par value is 1,000 and the purchase price was 812.77. The bond is redeemable at 110% of par. What is the yield to maturity (expressed as a nominal, semi-annual rate) Toby received if the bond was held to maturity?
John bought a 10-year bond for $925. The bond pays a coupon of 5 percent per year and payments are made semiannually. What is the Effective Annual Yield (EAY) on this bond? 10.67% 9.66% O 6.10% 6.30% 3.10%
Vincent purchased a $3,500 bond that was paying a 5.50% coupon rate and had 4 more years to mature. The yield at the time of purchase was 4.20% compounded semi-annually. a. How much did Vincent pay for the bond? Round to the nearest cent b. What was the amount of premium or discount on the bond?
Joel Barber purchased a $1,000 bond for $985. The coupon rate of interest is 8.5 percent, and the bond matures in 10 years. What is Joel's current yield on this bond? a. 8.73 percent b. 8.63 percent c. 9.85 percent d. 8.50 percent
Tracer Manufacturers issued a 10-year bond six years ago. The bond’s maturity value is $1,000, and its coupon interest rate is 6 percent. Interest is paid semiannually. The bond matures in four years. If investors require a return equal to 5 percent to invest in similar bonds, what is the current market value of Tracer’s bond?
Eleven years ago, Elite Elements issued a 15-year bond with a $1000 face value and a 5 percent coupon rate of interest (paid semiannually). If investors require a return equal to 7 percent to invest in similar bonds, what is the current market value of Elite’s bond?
One year ago , Igor purchased a newly issued 15- year bond for $1,000. The bond's coupon rate of interest is 4.8 percent (paid annually). If the current value of the bond is $1,038 , what are (a) the current yield and capital gains yield Igor earned during the year and (b) the bond's yield to maturity today ? (LO 6-4 & LO 6-5 )
You purchased a coupon bond that had a maturity of 20 years. The annual coupon interest rate was 10% paid annually, and the par value was $1,000. At the time you purchased the bond, the yield to maturity on the bond was 9%. You sold the bond one year later after receiving the first interest payment. The yield to maturity was 10% when you sold the bond. Calculate the purchase price of the bond. Calculate the selling price of the bond that you received one year later. Calculate the rate of return for the one-year holding period.
You purchased an annual-interest coupon bond one year ago with 7 years remaining to maturity at the time of purchase. The coupon interest rate is 10%, and par value is $1,000. At the time you purchased the bond, the yield to maturity was 9%. If you sold the bond after receiving the first interest payment and the bond's yield to maturity had changed to 8%, your annual total rate of return on holding the bond for that year would have been O 12.58% O 13.53% O4.01% O 14.64% 5.12%
If you were to purchase a bond for $1,100 that paid $50 per year in dividends, what will be the current yield of your bond?
Lola Ruiz has a bond that has 10 years to maturity, a face value of $1,000, an 7 percent interest rate, and a market price of $1,350. What is the dollar amount of annual interest on this bond?
Mark Goldsmith’s broker has shown him two bonds issued by different companies. Each has a maturity of 5 years, a par value of $1,000, and a yield to maturity of 7.5%. The first bond is issued by Crabbe Waste Disposal Corporation and has a coupon rate of 6.324% paid annually. The second bond, issued by Malfoy Enterprises, has a coupon rate of 8.8% paid annually. 1) Assume that Mark will reinvest all the interest he receives as it is paid, and his rate of return on reinvested interest will be 10%. Calculate the total dollars that Mark will accumulate over 5 years if he invests in Crabbe bonds or Malfoy bonds. Your total dollar calculation will include the interest Mark gets, the principal he receives when the bonds mature, and all the additional interest he earns from reinvesting the coupon payments that he receives.

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