Use the following information to answer questions 7 - 8.A 5-year 5% A-rated corporate bond's yield to maturity is 6%. Assume annual coupon.#7than 5% andThe bond gets downgraded to BB-. It's yield is likely to bethan 6%.Question 7What answer corresponds with the field labeled #35 above?lowerhighercannot tellQuestion 8What answer corresponds with the field labeled #36 above?lowerO highercannot tell#8

It has been provided: Face value (FV) = 1,000 Interest rate (Rate) = 6% Time period (NPER) = 5 years…

Answered: Use the following information to answer…

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) Determine the price of Bond X if it has 3 years to maturity, a par-value of $2500, a coupon rate of 5% paid annually and the rate of return in the bond market is fixed at 9%: (b) Hence, compute the duration of Bond X from Question 2(a) above. (c) List and explain one type of risk associated with bonds. 164 words 1284 MAR 12 MacBook Air D00 F1 F2 F3 F4 & 2$ 4 6 Q W
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Both ques....only typing 7. Five years ago a bond was priced at a premium. Since then, the yield to maturity for the bond has not changed. Is the price for that bond higher or lower today than it was five years ago? 8. You are assigning a yield to maturity for a 12% coupon bond based on your expectations of future economic conditions. If economic conditions are bad, the bond should have a 15% yield to maturity; if economic conditions stay as they are, the bond should have a 13% yield to maturity; and if economic conditions are good, the bond should have a 9% yield to maturity. You think there is a 25% chance economic conditions will be bad, a 45% chance that they will stay as they are, and a 30% chance that they will be good. Based on this, do you price the bond at a discount, par or premium?
Suppose that a bond has an 8% coupon, a 6% YTM, and a 4% YTC and is callable in 3 years. For this bond issue, investors would expect the bonds A. Not to be called and earn the YTM B. Not to be called and earn the YTC C. To be called and earn the YTM D. To be called and earn the YTC
Question 2A. A bond has a face value of $2000, a coupon rate of 6% and matures in 10years’ time. If its current yield to maturity is 8% what is the current price ofthe bond? If the yield falls to 4% determine the bond price. What do theseresults indicate about the relationship between the price of a bond and itsyield to maturity? B. You are asked to put a value on a bond which promises eight annual couponpayments of £70 and will repay its face value of £1000 at the end of eightyears. You observe that other similar bonds have yields to maturity of 9 percent. How much is this bond worth? You are offered the bond for a priceof £1030.44. What yield to maturity does this represent? C. Explain in detail the trade-off model of capital structure. In light of the currentglobal financial challenge, discuss which elements of the model areexpected to become most prevalent?
Please do not give solution in image formate thanku. A 2-year maturity bond with face value of $1,000 makes annual coupon payments of $96 and is selling at face value. What will be the annual rate of return on the bond if its yield to maturity at the end of the year is a. 6%? Rate of return in % = ? b. 9.6%? Rate of return in % = ? c. 11.6%? Rate of return in % = ?
BASIC (Questions 1-17) 1. Interpreting Bond Yields Is the yield to maturity on a bond the same thing as the required return? Is YTM the same thing as the coupon rate? Suppose today a 10 percent coupon bond sells at par. Two years from now, the required return on the same bond is 8 percent. What is the coupon rate on the bond now? The YTM? LO 2 LO 2 2. Interpreting Bond Yields Suppose vou buy a 7 percent counon 20-vear
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Required: a. Find the duration of a 8% coupon bond making annual coupon payments if it has three years until maturity and a yield to maturity of 6.9%. (Do not round intermediate calculations. Round your answers to 4 decimal places.) b. What is the duration if the yield to maturity is 10.9% ? (Do not round intermediate calculations. Round your answers to 4 decimal places.) YTM a. 6.9% YTM b. 10.9% YTM Duration Years Years

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