Solve with explanation accounting Suppose you purchase a T-bill that is 125 days frommaturity for $9,765. The T-bill has a face value of $10,000.a) Calculate the T-bill's quoted discount yield.b) Calculate the T-bill's bond equivalent yield.

Step 1: Information givenPurchase Price = $9,765Face Value = $10,000Maturity = 125 DaysStep 2:…

Answered: Suppose you purchase a T-bill that is…

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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If you have a coupon bond, its face value is $1,000 and the coupon rate is 4%. Complete the following table, then calculate the rate of return for the bond. If you know that it was purchased at the nominal value, comment on the results. due date return at maturity the price 2 0.02 3 0.04 5 0.06 Present Value Annuity value % n value % n 0.961 0.02 2 1.97 0.02 2 0.925 0.04 2 1.89 0.04 2 0.889 0.04 3 2.78 0.04 3 0.906 0.02 5 4.71 0.02 5 0.747 0.06 5 4.21 0.06 5
Let's denote the price of a nonmaturing bond (called a consol) as P. The equation that indicates this price is Pn =-, where I is the annual net income the bond generates and r is the nominal market interest rate. a. Suppose that a bond promises the holder $200 per year forever. The nominal market interest rate is 6 percent. Calculate the bond's current price: S. (Round your answer to the nearest whole dollar.)
Calculate the yield on the following bonds: A. Cost $1,000, semiannual coupon payment 3%. Since 3% is semiannual, then double it to get 6% annual yield. Always calculate yield in terms of annual percentage. B. Cost $950, semiannual coupon payment 3%. Since 3% is semiannual, then double it to get 6% annual yield. Always calculate yield in terms of annual percentage.
Consider a 10-year bond with a face value of $1,000 that has a coupon rate of 5.8%, with semiannual payments.
In this problem we are going to calculate bond prices and returns Suppose that the yield on a 3 year note is 2.5%. a) Calculate the price of the 3 year note (face value = $1000) with three annual coupon payments (after year 1, after year 2, after year 3) of $30, i.e., the coupon rate is 3.0%. b) Is this note selling at a discount or premium? Explain. Suppose that after one year and after you receive one coupon payment, you decide to sell your note. Your note is now a two year note with one coupon payment after 1 year and another after year 2. Consider the following two scenarios: Scenario #1 - interest rates on what is now a two year note (i.e., your note) have fallen to 1.00% Scenario #2 - interest rates on what is now a two year note (i.e., your note) have risen to 4% c) given scenan d) Calculate the price that you can sell your note for under scenario #1 and the associated rate of return when you sell your note Calculate the price that you can sell your note for under scenario #2…
Consider the following pure discount bonds with face value $1,000: Maturity Price 1 952.38 2 898.47 3 847.62 4 799.64 5 754.38 a). Find the spot rates and draw a yield curve.b). Assume that there is a constant liquidty premium that is equal to 1% across all maturities. Find the forward rates and the expected one period future interest rates.
Assume you have a bond with a semi-annual interest payment of $50, a par value of $1 comma 000, and a current market price of $870. What is the current yield of the bond?
Suppose you buy a one-year discount bond with a face value of $5,000 with a yield to maturity of 4%. What is the bond’s price?.
From the Treasury strip yield curve, the current required yields on one- and two-year Treasuries are i₁ = 4.65 percent and i₂ = 5.50 percent, respectively. Further, the current yield curve indicates that appropriate one-year discount bonds are yielding k₁ = 8.5 percent, and two-year bonds are yielding k₂ = 10.25 percent. (1) Calculate the one-year forward rate on the Treasuries. Convert your answer to percentage format. Enter your answer rounded to 2 decimals, and without any units. So, for example, if your answer is 3.4568%, then just enter 3.46.
A bond that pays interest semiannually has a price of $981.73 and a semiannual coupon payment of $27.75. If the par value is $1,000, what is the current yield?
Suppose that the yield curve shows that the one-year bond yield is 8 percent, the two-year yield is 7 percent, and the three-year yield is 7 percent. Assume that the risk premium on the one-year bond is zero, the risk premium on the two-year bond is 1 percent, and the risk premium on the three-year bond is 2 percent. a. What are the expected one-year interest rates next year and the following year? The expected one-year interest rate next year = The expected one-year interest rate the following year b. If the risk premiums were all zero, as in the expectations hypothesis, what would the slope of the yield curve be? The slope of the yield curve would be (Click to select) % %
Current yield

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Suppose you purchase a T-bill that is 125 days from maturity for $9,765. The T-bill has a face value of $10,000. a) Calculate the T-bill's quoted discount yield. b) Calculate the T-bill's bond equivalent yield.