(Related to Checkpoint 9.2 and Checkpoint 9.3) (Bond valuation) The 9-year $1,000 par bonds of Vail Inc. pay 11 percent interest. The market's required yield to maturity on a comparable-risk bond is 8 percent. The current market price for the bond is $1,110. a. Determine the yield to maturity. b. What is the value of the bonds to you given the yield to maturity on a comparable-risk bond? c. Should you purchase the bond at the current market price?

(Related to Checkpoint 9.2 and Checkpoint 9.3) (Bond valuation) The 9-year $1,000 par bonds of Vail Inc. pay 11 percent interest. The market's required yield to maturity on a comparable-risk bond is 8 percent. The current market price for the bond is $1,110. a. Determine the yield to maturity. b. What is the value of the bonds to you given the yield to maturity on a comparable-risk bond? c. Should you purchase the bond at the current market price?

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 10-year bond with a face value of $1,000 currently sells for $1,110. Which of the following statements is correct? Select one: a. The bond's current yield is equal to its coupon rate. b. The bond's coupon rate exceeds its current yield to maturity. c. None of the given answers is correct. d. The bond's yield to maturity is greater than its coupon rate.
Refer to Table 10-2. a. Assume the interest rate in the market (yield to maturity) goes down to 8 percent for the 10 percent bonds. Using column 2, indicate what the bond price will be with a 10-year, a 20-year, and a 25-year time period. b. Assume the interest rate in the market (yield to maturity) goes up to 12 percent for the 10 percent bonds. Using column 3, indicate what the bond price will be with a 10-year, a 20-year, and a 25-year period. c. Assume the interest rate in the market (yield to maturity) goes down to 8 percent for the 10 percent bonds. If interest rates in the market are going down, which bond would you choose to own? multiple choice 1 10 Years 20 Years 25 Years d. Assume the interest rate in the market (yield to maturity) goes up to 12 percent for the 10 percent bonds. If interest rates in the market are going up, which bond would you choose to own? multiple choice 2 10 Years 20 Years 25 Years
A 10-year bond with a face value of $1,000 currently sells for $1,110. Which of the following statements is correct? Select one: a. The bond's yield to maturity is greater than its coupon rate. b. The bond's coupon rate exceeds its current yield to maturity. c. The bond's current yield is equal to its coupon rate. d. None of the given answers is correct.
Assume coupons are paid annually. Here are the prices of three bonds with 10-year maturities. Assume face value is $100. Bond Coupon (%) 2 Price (%) 48 80.57 97.19 134.92 a. What is the yield to maturity of each bond? b. What is the duration of each bond? Complete this question by entering your answers in the tabs below. Required A Required B What is the yield to maturity of each bond? Note: Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places. Bond Coupon YTM (%) 2 4 6.00 % 7.42% 8 7.01 %
The 12-year $1,000 par bonds of Vail Inc. pay 8 percent interest. The market's required yield to maturity on a comparable-risk bond is 12 percent. The current market price for the bond is $850. a. Determine the yield to maturity. b. What is the value of the bonds to you given the yield to maturity on a comparable-risk bond? c. Should you purchase the bond at the current market price? Question content area bottom Part 1 a. What is your yield to maturity on the Vail bonds given the current market price of the bonds? enter your response here% (Round to two decimal places.)
The following table summarizes current prices of various zero-coupon bonds (expressed as a percentage of face value): Bond A B C D Maturity (years) 1 2 3 4 Price (per $100 face value) 96.62 82.56 82.69 83.26 E.G for bond A it will mature in 1 year and has a current bond price of $96.62. For bond B, it will mature in 2 years and had a current bond price of $82.56 Assume the YTM for each bond doesn't change over time. After two years, what is the price for bond D? 1. bond A 2. bond B 3. bond C 4. Bond D
(Related to Checkpoint 9.2) (Yield to maturity) The Saleemi Corporation's $1,000 bonds pay 7 percent interest annually and have 9 years until maturity. You can purchase the bond for $885. a. What is the yield to maturity on this bond? b. Should you purchase the bond if the yield to maturity on a comparable-risk bond is 10 percent? a. The yield to maturity on the Saleemi bonds is %. (Round to two decimal places.)
(Related to Checkpoint 9.2 and Checkpoint 9.3) (Bond valuation relationships) The 19-year, $1,000 par value bonds of Waco Industries pay 11 percent interest annually. The market price of the bond is $925, and the market's required yield to maturity on a comparable-risk bond is 14 percent. a. Compute the bond's yield to maturity. b. Determine the value of the bond to you given the market's required yield to maturity on a comparable-risk bond. c. Should you purchase the bond?
(Related to Checkpoint 9.2 and Checkpoint 9.3) (Bond valuation relationships) The 16-year, $1,000 par value bonds of Waco Industries pay 11 percent interest annually. The market price of the bond is $855, and the market's required yield to maturity on a comparable-risk bond is 15 percent. a. Compute the bond's yield to maturity. b. Determine the value of the bond to you given the market's required yield to maturity on a comparable-risk bond. c. Should you purchase the bond? C a. What is your yield to maturity on the Waco bonds given the current market price of the bonds? % (Round to two decimal places.)
(Bond valuation relationships) A bond of Visador Corporation pays $70 in annual interest, with a $1,000 par value. The bonds mature in 18 years. The market's required yield to maturity on a comparable-risk bond is 8.5 percent. a. Calculate the value of the bond. b. How does the value change if the market's required yield to maturity on a comparable-risk bond (i) increases to 12 percent or (ii) decreases to 4 percent? c. Interpret your finding in parts a and b. Question content area bottom Part 1 a. What is the value of the bond if the market's required yield to maturity on a comparable-risk bond is 8.5 percent? $enter your response here (Round to the nearest cent.)
(Related to Checkpoint 9.3) (Bond valuation) Doisneau 22-year bonds have an annual coupon interest of 8 percent, make interest payments on a semiannual basis, and have a $1,000 par value. If the bonds are trading with a market's required yield to maturity of 16 percent, are these premium or discount bonds? Explain your answer. What is the price of the bonds? Question content area bottom Part 1 a. If the bonds are trading with a yield to maturity of 16%, then (Select the best choice below.) A. the bonds should be selling at a premium because the bond's coupon rate is greater than the yield to maturity of similar bonds. B. there is not enough information to judge the value of the bonds. C. the bonds should be selling at par because the bond's coupon rate is equal to the yield to maturity of similar bonds. D. the bonds should be selling at a discount because the bond's coupon rate is less than the yield to maturity of similar…
(Related to Checkpoint 9.2 and Checkpoint 9.3) (Bond valuation) The 15-year $1,000 par bonds of Vail Inc. pay 13 percent interest. The market's required yield to maturity on a comparable-risk bond is 11 percent. The current market price for the bond is $1,060. a. Determine the yield to maturity. b. What is the value of the bonds to you given the yield to maturity on a comparable-risk bond? c. Should you purchase the bond at the current market price? a. What is your yield to maturity on the Vail bonds given the current market price of the bonds? % (Round to two decimal places.) C

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