Rick bought a bond Question 2-Bond valuation with annual coupon payments when it was issued by Macroflex Corporation 14 years ago. The bond, which has a $1,000 face value and a 10% coupon rate, matures in six years. Interest is paid annually; the next interest payment is scheduled for one year from today. If the yield on similar risk investments is 12 percent, what is the current market value (price) of the bond?

Rick bought a bond Question 2-Bond valuation with annual coupon payments when it was issued by Macroflex Corporation 14 years ago. The bond, which has a $1,000 face value and a 10% coupon rate, matures in six years. Interest is paid annually; the next interest payment is scheduled for one year from today. If the yield on similar risk investments is 12 percent, what is the current market value (price) of 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

See similar textbooks

Similar questions

(Bond valuation) A bond that matures in 11 years has a $1,000 par value. The annual coupon interest rate is 8 percent and the market's required yield to maturity on a comparable-risk bond is 15 percent. What would be the value of this bond if it paid interest annually? What would be the value of this bond if it paid interest semiannually? a. The value of this bond if it paid interest annually would be $__________. (Round to the nearest cent.)
(Bond valuation) A bond that matures in 15years has a $1,000 par value. The annual coupon interest rate is 13 percent and the market's required yield to maturity on a comparable-risk bond is 14 percent. What would be the value of this bond if it paid interest annually? What would be the value of this bond if it paid interest semiannually? The value of this bond if it paid interest semiannually would be $________(Round to the nearest cent.)
Jenna bought a bond that was issued by Sherlock Watson Industries (SWI) three years ago. The bond has a $1,000 maturity value, a coupon rate equal to 9%, a market rate (yield to maturity) of 10%, and it matures in 17 years. Interest is paid every six months; the next interest payment is scheduled six months from today. If the yield on a similar risk investment is 11%, what is the current market value (price) of the bond? What is the capital gains yield, current yield, and total yield that will be earned if the bond is held until it matures? Assume that the market rate does not change from now until maturity. Suppose that Jenna wants to sell her bond seven years from today when 10 years remain until maturity. If the market rate is 8% at the time she sells the bond in seven years, for what price will Jenna be able to sell the bond? What would be the capital gains yield, current yield, and total yield that the new investor will earn if he/she holds the bond until it matures 10 years…
Can I get the answers to 8.1 and 8.2.
A $1,000 bond has a coupon of 4 percent and matures after tên years. ASsume that the bond pays interest annually. a. What would be the bond's price if comparable debt yields 6 percent? Use Appendix B and Appendix D to answer the question. Round your answer to the nearest dollar. $ b. What would be the price if comparable debt yields 6 percent and the bond matures after five years? Use Appendix B and Appendix D to answer the question. Round your answer to the nearest dollar. c. Why are the prices different in a and b? The price of the bond in a is -Select- v than the price of the bond in b as the principal payment of the bond in a is -Select- v than the principal payment of the bond in b (in time). d. What are the current yields and the yields to maturity in a and b? Round your answers to two decimal places. The bond matures after ten years: CY: % YTM: % The bond matures after five years: CY: YTM:
If you buy municipal bond (tax free) that cost $1,000 and will pay a 4.7% coupon every year for the next 10 years (so the maturity date is in 10 years). At maturity the bond returns the original $1,000. If there is a 2.5% annual inflation, a) what real rate of return will you receive? b) How much real $ profit did you make from the bond?
Consider a bond issued by MGM Inc. exactly two years ago. At that time the bond’s time to maturity was 30 years. The bond pays semiannual coupons with the coupon rate of 6% per year. The face value of the bond is $1000. a. What is the bond’s price today, if today’s market interest rate for bonds of comparable maturity and default risk is 8% per year? b. You would like to speculate and believe that tomorrow the market interest rate for comparable bonds would decrease to 5%, would you buy or sell short this bond today? c. Suppose that exactly two years from today the price of the bond will be $900, what is the annual YTM at that time? Please explain without using excel
A few years ago, Zabar Technology issued an annual bond that has a face value equal to $1,000 and pays investors $40 interest semiannually. The bond has four years remaining until maturity. If an investor requires a 5% rate of return to invest in this bond, what is the maximum price he or she should be willing to pay to purchase the bond today? O $1,106.38 O $964.54 O $1,107.55 $935.37
Jimmy has a bond with a $1,000 face value and a coupon rate of 8.25% paid semiannually. It has a five-year life. If investors are willing to accept a 12 percent rate of return on bonds of similar quality, what is the present value or worth of this bond? Show your work. What is the impact of paying interest semi-annually rather than annually? Explain.
Assume that all interest rates are certain - all investors know how interest rates will change over time. Two years ago, you purchased a 10-year bond with a face value of $1,000.00 and annual coupons of 7.4%. When you purchased the bond, the one year spot rate was 6.3% and the two year spot rate was 9.8%. You reinvested the first coupon payments at the prevailing rate and then sold the bond after two years at a yield to maturity of 10.9%. If your realised compound yield on the bond was 14.4%, what was the bond's initial purchase price? O a. $747.53 O b. $749.59 O c. $751.34 O d. $755.36 O e. $753.70 O f. $746.65 O g. $754.38 Oh. $757.80
Typing answer A couple purchased a bond for $950.00 three years ago. The bond pays 7.75% APR with semi-annual coupons with a face value of $1,000. Currently, the bond has exactly 10 years until maturity, and investors seek a return of 12.00% APR on bonds of similar risk. What is the current price of the bond?
Baghiben

SEE MORE QUESTIONS

Recommended textbooks for you

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

SEE MORE TEXTBOOKS