Suppose that General Motors Acceptance Corporation issued a bond with 10 years until maturity, a face value of $1,000, and a coupon rate of 7.6% (annual payments).The yield to maturity on this bond when it was issued was 6.1%. Assuming the yield to maturity remains constant, what is the price of the bond immediately before itmakes its first coupon payment?Before the first coupon payment, the price of the bond is $(Round to the nearest cent.)

Bond valuation seems to be a way to ascertain a bond's fair value. The core premise of bond…

Answered: Suppose that General Motors Acceptance…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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K Suppose that General Motors Acceptance Corporation issued a bond with 10 years until maturity, a face value of $1,000, and a coupon rate of 7.0% (annual payments). The yield to maturity on this bond when it was issued was 6.0%. Assuming the yield to maturity remains constant, what is the price of the bond immediately after it makes its first coupon payment? KIER After the first coupon payment, the price of the bond will be $. (Round to the nearest cent.)
A 10-year bond has face value (redemption value) $250,000 and quarterly coupons of 2%. Consider the time right after the 12th coupon has been paid, when the yield is 3.4%. (a) What is the price of the bond? (b) Compute the price of the bond if the yield were to increase by 1 basis point (a basis point is 1/100 of 1%). What is the absolute value of the difference between that price, and your answer to part a)? (c) Would the yield have to increase or decrease in order for the bond to increase in value by $885.53? (d) Based only on your answer to b), approximately how many basis points (bp) would the yield have to move in order for the bond to increase in value by $885.53? (Answer as a positive integer.) b): #5(c): (A) Decrease (B) Increase 5(d): Answer correct to 2 decimals. Select Answer correct to 2 decimals. Answer as a positive integer
1) A 30-year bond was issued 28 years ago. The bond has a face value of $1,000, a coupon rate of 6% and a yield of 5%. Coupons are paid semi-annually. a) What is the price of the bond? b) What is the Macaulay duration of the bond? c) What is the modified duration of the bond? d) If the yield of the bond rises to 5.1%, what is the predicted change in the bond’s price? 2) a) Which is greater: Macaulay Duration or modified duration? b) For a bond with a modified duration of 3 and a price of $1,000, what would happen to the bond’s price if its yield increased by 1 basis point? c) Why does modified duration only provide an approximate change to a bond’s price due to a change in yield to maturity?
1. Suppose a five-year, $ 1000 bond with annual coupons has a price of $ 898.64 and a yield to maturity of 5.5%. What is the bond's coupon rate? 2.) The yield to maturity of a $ 1000 bond with a 6.8% coupon rate, semi-annual coupons, and two years to maturity is 7.8 % APR, compounded semi-annually. What must its price be? 3.) Assume that a bond will make payments every six months as shown on the following timeline (using six-month periods): The timeline starts at Period 0 and ends at Period 30. The timeline shows a cash flow of $ 19.01 each from Period 1 to Period 29. In Period 30, the cash flow is $ 19.01 plus $ 1,000. Period 1, 2,29,30 Cash Flows: $ 19.01, $19.01, $19.01, $19.01 + $1,000 a. What is the maturity of the bond ( in years)? b. What is the coupon rate (as a percentage )? c. What is the face value?
a. Calculate the value of Macaulay’s duration for a 10-year, $1000 par value bond purchased today at a yield to maturity of 14% and a coupon rate of 10%. b. From the answer in (a) calculate the modified duration of the bond assuming the prevailing interest rate is still 14%. c. Now suppose the market interest rate on comparable bonds falls to 13 percent. What will be the approximate percentage change in the bond price.? (Hint: use the modified duration for your computation in (b))
A Treasury bond that matures in 10 years has a yield of 5.25%. A 10-year corporate bond has a yield of 8.75%. Assume that the liquidity premium on the corporate bond is 0.45%. What is the default risk premium on the corporate bond? Round your answer to two decimal places.
Suppose that Ally Financial Inc. issued a bond with 10 years until maturity, a face value of $1,000, and a coupon rate of 11% (annual payments). The yield to maturity on this bond when it was issued was 13%. a. What was the price of this bond when it was issued? b. Assuming the yield to maturity remains constant, what is the price of the bond immediately before it makes its first coupon payment? c. Assuming the yield to maturity remains constant, what is the price of the bond immediately after it makes its first coupon payment?
The current market price of a given zero-coupon bond is $747.470. The face value of the bond is $1,000.000. The annualized continuously compounded yield on the bond is 8.000%. Then, what is the implied time to maturity (in years) of this bond?
A 15-year bond with a face value of $1,000 currently sells for $850. Which of the following statements is most correct? The bond's yield to maturity is greater than its coupon rate. If the yield to maturity stays constant until the bond matures, the bond's price will remain at $850. The bond's current yield is equal to the bond's coupon rate. The bond's yield to maturity is the same as capital gain yield. All of the statements above are correct. None of the above are correct
Assume that you pay $815.36 for a long-term bond that carries a coupon of 7.7%. Over the course of the next 12 months, interest rates drop sharply. As a result, you sell the bond at a price of $958.17. a. Find the current yield that existed on this bond at the beginning of the year. What was it by the end of the one-year holding period? b. Determine the holding period return on this investment. (Hint: See Chapter 4 for the HPR formula.) ... a. The current yield that existed on this bond at the beginning of the year is %. (Round to two decimal places.)
General Electric has just issued a callable (at par) 10-year, 6.3% coupon bond with annual coupon payments. The bond can be called at par in one year or anytime thereafter on a coupon payment date. It has a price of $101.68. a. What is the bond's yield to maturity? b. What is its yield to call? c. What is its yield to worst? a. What is the bond's yield to maturity? The bond's yield to maturity is%. (Round to two decimal places.) b. What is its yield to call? The yield to call is%. (Round to two decimal places.) c. What is its yield to worst? The yield to worst is%. (Round to two decimal places.)
Suppose you are given the following information about four different, default-free bonds, each with a face value of $1,000. The coupon bonds have annual payments. The yield to maturity of bond A with a maturity of 1 year and a coupon rate of 0% is 2%. The yield to maturity of bond B with a maturity of 2 year and a coupon rate of 10% is 3.908%. The yield to maturity of bond C with a maturity of 3 year and a coupon rate of 6% is 5.840%. The yield to maturity of bond D with a maturity of 4 year and a coupon rate of 12% is 5.783%. Given this information, what is the four-year spot rate?

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