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 7.4% (annual payments).The yield to maturity on this bond when it was issued was 5.6%. Assuming the yield to maturity remains constant, what is the price of the bond immediately after it makesits first coupon payment?After the first coupon payment, the price of the bond will be $(Round to the nearest cent.)

Bonds are debt instrument that offers fixed interest. The bond interest is called the coupon rate.…

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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A bond has 10 years remaining to maturity, pays annual coupons (yesterday) of $6, and has a face value of $100. The current price of the bond is $125.591 and the price next year is expected to be $123.358. (Interest rates are not expected to change over the coming year.) What is the yield to maturity on the bond?
What is the semi-annual coupon bond’s nominal yield to maturity (YTM), if the years to maturity is 15 years, and sells for 119% with coupons rate of 10%? Assume the par value of the bond is $1,000.
Showbiz, Inc., has issued eight-year bonds with a coupon of 5.78 percent and semiannual coupon payments. The market’s required rate of return on such bonds is 6.25 percent. a. What is the market price of these bonds? b. If the above bond is callable after five years at an 11.7 percent premium on the face value, what is the expected return on this bond?
You purchase a bond with an invoice price of $1,170. The bond has a coupon rate of 7.2 percent, and there are 2 months to the next semiannual coupon date. What is the clean price of the bond? Assume a par value of $1,000.
A bond with 8 years to maturity has an annual coupon rate of 5.1% and pays interest semiannually. Assume that today we are 58 days into the current 183- day coupon payment period, and the required rate of return is 5.7%. What is the flat price that would be quoted by a dealer on this bond, per $100 of par value?
A bond with 10 years to maturity has a face value of $1,000. The bond can be called in four years for $1050. The bond pays a 6 percent semiannual coupon and the bond has a 1.1 percent nominal yield to maturity. What is the price of the bond today assuming that it will be called?
Suppose that a bond has a face value of $200 000 and its maturity date is 10 years from now. The coupon rate is 5% payable semi-annually. Find the fair price of this bond, assuming that the annual market rate is 4%.
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
Suppose you purchase a 10-year bond with 6% annual coupons. You hold the bond for four years and sell it immediately after receiving the fourth coupon. If the bond's yield to maturity was 4.01% when you purchased and sold the bond, a. What cash flows will you pay and receive from your investment in the bond per $100 face value? b. What is the internal rate of return of your investment? Note: Assume annual compounding. The cash flow at time 1-3 is $ (Round to the nearest cent. Enter a cash outflow as a negative number.) (Round to the nearest cent. Enter a cash outflow as a negative number.) The cash outflow at time 0 is $ The total cash flow at time 4 (after the fourth coupon) is $ negative number.) b. What is the internal rate of return of your investment? (Round to the nearest cent. Enter a cash outflow as a
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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 payme 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? After the first coupon payment, the price of the bond will be $ (Round to the nearest cent.) KITS

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