ur broker faxed you the following information on two semiannual coupon bonds that you are considering as a potential investment. Unfortunately, your fax machine is blurring some of the items and all you can read from the fax on the two different bonds is the following information: IBM Coupon Bond AOL Coupon Bond Face Value (Par) $1,000 $1,000 Coupon Rate 5.5% Yield to Maturity 7.5% 9.5% Years to Maturity 10 20 Price $1689.15 Fill in the missing data from the information sent by the broker. price for IBM Coupon Bond and rate for AOL Coupon Bond

ur broker faxed you the following information on two semiannual coupon bonds that you are considering as a potential investment. Unfortunately, your fax machine is blurring some of the items and all you can read from the fax on the two different bonds is the following information: IBM Coupon Bond AOL Coupon Bond Face Value (Par) $1,000 $1,000 Coupon Rate 5.5% Yield to Maturity 7.5% 9.5% Years to Maturity 10 20 Price $1689.15 Fill in the missing data from the information sent by the broker. price for IBM Coupon Bond and rate for AOL Coupon Bond

Excel Applications for Accounting Principles

4th Edition

ISBN:9781111581565

Author:Gaylord N. Smith

Publisher:Gaylord N. Smith

Chapter11: Bond Pricing And Amortization (bonds)

Section: Chapter Questions

Problem 8R: a. Reset the Data Section to its initial values. The price of this bond is 1,407,831. What would it...

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Suppose that the prices of zero-coupon bonds with various maturities are given in the following table. The face value of each bond is $1,000. Maturity (Years) 1 2 3 4 5 Show Transcribed Text B) How could you construct a 1-year forward loan beginning in year 3? (Face Value) C) How could you construct a 1-year forward loan beginning in year 4? (Face Value) Required A Required B Complete this question by entering your answers in the tabs below. Face value Rate of synthetic loan → Show Transcribed Text Price $ 970.93 898.39 836.92 How could you construct a 1-year forward loan beginning in year 3? Note: Round your Rate of synthetic loan answer to 2 decimal places. Required A 776.20 685.42 Required B Face value Rate of synthetic loan Required C 7.85 % Required C How could you construct a 1-year forward loan beginning in year 4? Note: Round your Rate of synthetic loan answer to 2 decimal places. Ċ 13.29 %
a. Reset the Data Section to its initial values. The price of this bond is 1,407,831. What would it be if there were only 9 or 8 years to maturity? Use the worksheet to compute the bond issue prices and enter them in the spaces provided. Bond issue price (9 years to maturity) __________________ Bond issue price (8 years to maturity) __________________ b. Compare these prices to the bond-carrying values found in the effective interest amortization schedule you originally printed out in requirement 3. Explain the similarity. c. Click the Chart sheet tab. The chart presented shows the price behavior of this bond based on years to maturity. Explain what effect years to maturity has on bond prices. Check your explanation by trying 8% as the effective rate (cell E10) and clicking the Chart sheet tab again. Also try 9%. When the assignment is complete, close the file without saving it again. Worksheet. Modify the BONDS3 worksheet to accommodate bonds with up to 20-year maturity. Use your new model to determine the issue price and amortization schedules of a 2,000,000, 18-year, 10% bond issued to yield 9%. Preview the printout to make sure that the worksheet will print neatly, and then print the worksheet. Save the completed file as BONDST. Hint: Expand both amortization schedules to 20 years. Expand the scratch pad to 20 years. Modify FORMULA1 in cell F17 to include the new ranges. Chart. Using the BONDS3 file, prepare a line chart that plots annual interest expense over the 10-year life of this bond under both the straight-line and effective interest methods. No Chart Data Table is needed. Put A23 to A32 in the Label format and then select A23 to A32, D23 to D32, and B40 to B49 as a collection. Enter all appropriate titles, legends, formats, and so forth. Enter your name somewhere on the chart. Save the file again as BONDS3. Print the chart.
You want to determine the value of your company bond that you have held. The market has not traded your security in a long time but still makes payments semiannually 6.2% coupon and 7 years. You find two similar bonds with characteristics as follows. Bond X: 4-year 6% coupon priced at 950 Bond Y: 6-year 5% coupon priced at 980, 1000 bond value a. What is the approximate price of your bond? b. How does your bond compare to the other two bonds?
Bond valuation related problems should be solved by using a financial calculator or MS excel spreadsheet. Accordingly, you must show the values of all relevant time value of money variables Findlay company recently issued bonds with a 20-year maturity, a 7.5% semiannual coupon, and a par value of $1,000. The going interest rate (kd, rd) is 6.0%, based on semiannual compounding. What is the bond's price?
Hello guys I just get an email from your support center to post the questions separated. Two bonds A and B have the same credit rating, the same par value and the same coupon rate. Bond A has 30 years to maturity and bond B has five (5) years to maturity. Please demonstrate your understanding of interest rates risk by answering the following questions : Discuss which bond will trade at a higher price in the market Discuss what happens to the market price of each bond if the interest rates in the economy go up. Which bond would have a higher percentage price change if interest rates go up? Please substantiate your argument with numerical examples. As a bond investor, if you expect a slowdown in the economy over the next 12 months, what would be your investment strategy?
Problem: You are given the following data for two bonds with semiannual payments (A and B) Bond Settlement Date B 2/15/2020 2/15/2020 Maturity Date Coupon rate 2/15/2040 2/15/2040 4% 8% Similar bonds with 20 year to maturity sell for 9% coupon rates in the market. a) Calculate the bond value for bond A and B b) Calculate the YTM for bond A and B Bond Valuation Settlement Date 2/15/2020 2/15/2020 Maturity Date Coupon rate Required return Redemption Value Frequency Basis Calculate the PV of the bond in U.S. S 2/15/2040 2/15/2040 8% 4% 4.50% 4.50% 100 100 2 a) Use the Price Function B) Use the Yield Function
Suppose that the prices of zero-coupon bonds with various maturities are given in the following table. The face value of each bond is $1,000. Maturity (Years) 1 2 3 4 5 Price $983.78 865.89 797.92 732.00 660.24 Required: a. Calculate the forward rate of interest for each year. b. How could you construct a 1-year forward loan beginning in year 3? c. How could you construct a 1-year forward loan beginning in year 4?
Suppose that the prices of zero-coupon bonds with various maturities are given in the following table. The face value of each bond is $1,000. Maturity (Years) 1 2 3 4 5 Required: a. Calculate the forward rate of interest for each year. b. How could you construct a 1-year forward loan beginning in year 3? c. How could you construct a 1-year forward loan beginning in year 4? Required A Price $940.93 Complete this question by entering your answers in the tabs below. 868.39 800.92 735.40 670.48 Required B Maturity (years) 2 3 Calculate the forward rate of interest for each year. Note: Round your answers to 2 decimal places. Required C Forward Rate % % Prov 12 of 12 Next
Submit your solutions as an Excel document. Be sure to clearly label the various parts of the problem. 1. Consider the following two bonds that make semi - annual coupon payments. Assume the first coupon payment occurs in exactly six months, and the bond has a face value of $1000. Coupon Rate Time to Maturity YTM Bond A 3.80% 8 years 3.6% Bond B 3.80% 18 years 4.2% a.) What is the current price (t = 0) of Bond A? Be sure to set up the valuation equation. b.) What will be the price of Bond A exactly halfway in between t = 0 and the first coupon date? c.) Using a spreadsheet, plot the price - yield relationship for both Bond A and Bond B on the same set of axes. Do this for a range of yields from 2% to 11% (in increments of 50 basis points). d.) Use a spreadsheet to compute the annualized Macaulay duration and modified duration for Bond A at a yield - to - maturity of 3.6%. Provide an interpretation of the modified duration with regards to maturity and interest rate risk. e.) Use a…
Missing information on a bond. Your broker faxed to you the following information about two semiannual coupon bonds that you are considering as a potential investment. Unfortunately, your fax machine is blurring some of the items, and all you can read from the fax on the two different bonds is the following: Fill in the missing data from the information that the broker sent. Data table What is the price of the IBM coupon bond? $ (Round to the nearest cent.) (Click on the following icon in order to copy its contents into a spreadsheet.) Features IBM Coupon Bond AOL Coupon Bond Face value (Par) $1,000 $5,000 Coupon rate 11.5% ? Yield to maturity 9.5% 10.5% Years to maturity 25 20 Price ? $4,792.66
Your broker offers to sell for $1,060 a AAA-rated bond with a coupon rate of 5 percent and a maturity of seven years. Given that the interest rate on comparable debt is 4 percent, calculate the bond's price. Assume that the bond pays interest annually. Use Appendix B and Appendix D to answer the question. Round your answer to the nearest dollar. Is your broker fairly pricing the bond? -Select- V so the bond-Select- v be purchased.
Please use a financial calculator for accurate answers You currently own a bond with the following characteristics: Years to Maturity: 9 Face Value: $1,000 Coupon Rate: 8%/annum Market Return: 6%/annum Pays coupon semi-annually Calculate the present value of the bond: Another bond in the market has the following characteristics: Years to Maturity: 6 Face Value: $980 Coupon Rate: 6%/annum Market Return: 6%/annum Pays coupon semi-annually Should you sell your existing bond to purchase the second bond? Why/ why not?