Suppose that General Motors Acceptance Corporation issued a bond with 10 years until maturity, a face value of $1000, and a coupon rate of 7.9 % (annual payments). The yield to maturity on this bond when it was issued was 5.9 %. Assuming the yield to maturity remains constant, what is the price of the bond immediately before it makes its first coupon payment?

Suppose that General Motors Acceptance Corporation issued a bond with 10 years until maturity, a face value of $1000, and a coupon rate of 7.9 % (annual payments). The yield to maturity on this bond when it was issued was 5.9 %. Assuming the yield to maturity remains constant, what is the price of the bond immediately before it makes its first coupon payment?

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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As with most bonds, consider a bond with a face value of $1,000. The bond's maturity is 25 years, the coupon rate is 9% paid annually, and the discount rate is 3%. What is the bond's Current Yield? Enter your answer as a percentage, without the "%' sign, and rounded to one decimal. For example, if your answer is 0.031416, which is equivalent to 3.1416%, just enter 3.1
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.)
A bond has 10 years until maturity, a coupon rate of 8.3%, and sells for $1,170. Interest is paid annually. ( Assume a face value of $1,000.) If the bond has a yield to maturity of 9.7% 1 year from now, what will its price be at that time? Note: Do not round intermediate calculations. Round your answer to nearest whole number. What will be the rate of return on the bond? Note: Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. Negative amount should be indicated by a minus sign. If the inflation rate during the year is 3%, what is the real rate of return on the bond? Note: Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. Negative amount should be indicated by a minus sign.
A bond offers a coupon rate of 4%, paid annually, and has a maturity of 6 years. The current market yield is 13%. Face value is $1,000. If market conditions remain unchanged, what should be the Capital Gains Yield of the bond?
A coupon bond of 8.4 percent with 18 years left to maturity is priced to offer a 6.70 percent yield to maturity. You believe that in one year, the yield to maturity will be 7.4 percent. (Assume interest payments are semiannual.) What would be the total return of the bond in dollars? What would be the total return of the bond in percentage?
Consider a bond with one year remaining to maturity, a $1,000 face value, an 8 percent coupon rate (paid semi-annually), and an interest rate (either required rate of return or yield to maturity) of 20 percent. What is the duration of the bond?
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?
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
What is the duration of a five-year bond with a coupon rate of 7%, a yield to maturity of 8%, a semi-annual coupon payment, and a face value of $1,000?
A Treasury bond that matures in 10 years has a yield of 4.25%. A 10-year corporate bond has a yield of 8.00%. Assume that the liquidity premium on the corporate bond is 0.40%. What is the default risk premium on the corporate bond? Round your answer to two decimal places.
Consider a bond paying a coupon rate of 9.5% per year quarterly when the market interest rate is 5.25% per half-year. The bond has four years until maturity. a. Find the bond’s price today and nine months from now. b. What is the total rate of return on the bond?
Boeing Corporation has just issued a callable (at par) three-year, 4.9% coupon bond with semi-annual coupon payments. The bond can be called at par in two years or anytime thereafter on a coupon payment date. It has a price of $99.04. 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.)

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