(rounded to nearest dollar) A ten year bond issue with a face amount of $100,000 bears interest 16. $ at the rate of 5.0%. The current market rate of interest is 4.90%. Determine the issue price of this annual bond.
(rounded to nearest dollar) A ten year bond issue with a face amount of $100,000 bears interest 16. $ at the rate of 5.0%. The current market rate of interest is 4.90%. Determine the issue price of this annual 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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Transcribed Image Text:(rounded to nearest dollar) A ten year
bond issue with a face amount of $100,000 bears interest
16. $
at the rate of 5.0%. The current market rate of interest is
4.90%. Determine the issue price of this annual bond.
17. Bond X and Bond Y are both issued by the same
company. Each of the bonds has a face value of $100,000
and each matures in 10 years. Bond X pays 8% interest
while Bond Y pays 7% interest. The current market rate
of interest is 7%. Which of the following is correct?
Both bonds will sell for the same amount.
а.
b.
Bond X will sell for more than Bond Y.
с.
Bond Y will sell for more than Bond X.
Both bonds will sell at a premium.
18. Given the information below, which bond(s) will be
d.
issued at a discount?
Bond 1 Bond 2| Bond 3 Bond 4
Stated Rate of Return
5%
7%
12%
10%
Market Rate of Return 7%
8%
12%
9%
19.
% BD Company issues 6%, 10-year bonds with a
face amount of $1,000,000 on January 1, 20A for
$1,000,000. Interest is paid semiannually on June 30 and
December 31. What was the market interest rate for the
bond issuance?
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