22. McCurdy Co.'s Class Q bonds have a 12-year maturity, $1,000 par value, a coupon rate of 5.75%, and interest is paidsemiannually, and those bonds sell at their par value. McCurdy's Class P bonds have the same risk, maturity, and parvalue, but the P bonds have a coupon rate of 5.75%, and interest is paid annually. Neither bond is callable. At what priceshould the annual payment bond sell?a. $943.98b. $968.18c. $993.01d. $1,017.83c. $1,043.28

Bond valuation entails determining the present value of a bond's future cash flows, which include…

value, but the P bonds have a coupon rate of 5.75%, and interest is paid annually. Neither bond is callable. At what price should the annual payment bond sell? a. $943.98 b. $968.18 c. $993.01 d. $1,017.83 c. $1,043.28

value, but the P bonds have a coupon rate of 5.75%, and interest is paid annually. Neither bond is callable. At what price should the annual payment bond sell? a. $943.98 b. $968.18 c. $993.01 d. $1,017.83 c. $1,043.28

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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Question

22. McCurdy Co.'s Class Q bonds have a 12-year maturity, $1,000 par value, a coupon rate of 5.75%, and interest is paid
semiannually, and those bonds sell at their par value. McCurdy's Class P bonds have the same risk, maturity, and par
value, but the P bonds have a coupon rate of 5.75%, and interest is paid annually. Neither bond is callable. At what price
should the annual payment bond sell?
a. $943.98
b. $968.18
c. $993.01
d. $1,017.83
c. $1,043.28

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5-year Treasury bonds yield 3.6%. The inflation premium (IP) is 1.9%, and the maturity risk premium (MRP) on 5-year T-bonds is 0.5%. There is no liquidity premium on these bonds. What is the real risk-free rate, r*?
Prices of zero-coupon bonds reveal the following pattern of forward rates: Year 1 2 3 Forward Rate 4% 5 6 In addition to the zero-coupon bond, investors also may purchase a 3-year bond making annual payments of $40 with par value $1,000. Required: a. What is the price of the coupon bond? Note: Do not round intermediate calculations. Round your answer to 2 decimal places. b. What is the yield to maturity of the coupon bond? Note: Do not round intermediate calculations. Round your answer to 2 decimal places. c. Under the expectations hypothesis, what is the expected realized compound yield of the coupon bond? Note: Do not round intermediate calculations. Round your answer to 2 decimal places. d. If you forecast that the yield curve in 1 year will be flat at 5.5%, what is your forecast for the expected rate of return on the coupon bond for the 1-year holding period? Note: Do not round intermediate calculations. Round your answer to 2 decimal places. a. Price b. Yield to maturity c.…
Vijay
Bond A pays annual interest, has 6 percent annual coupons, $1,000 face value, and currently has 6 percent yields to maturity. The bond has 12 years to maturity. If the market rate of interest rises unexpectedly to 7 percent, what is the percentage change in the price of Bond A? A) -3.39% B) -5.73% C) -6.08% D) -7.94%
Using formulas, no tables correct answers: i) i17.3746% pa i2=8.981% pa i3=6.4562% pa ii) i(c3) 6.5764% pa In a market where spot rates apply, the two-year forward rate of interest at time t = 1 is 6% per annum effective. The issue price per £100 nominal of a two-year fixed interest bond that pays annual coupons of 4% in arrears and is redeemed at 105% is £95.5. At the same time, the issue price per £100 nominal of a three-year fixed interest bond that pays 6% in arrears and is redeemed at par is £98.5. (i) Calculate all possible annual spot-rates. (ii) Calculate the three-year par yield.
Bond J has a coupon rate of 5 percent. Bond K has a coupon rate of 15 percent. Both bonds have eight years to maturity, a par value of $1,000, and a YTM of 11 percent, and both make semiannual payments. a. If interest rates suddenly rise by 2 percent, what is the percentage change in the price of these bonds? Note: A negative answer should be indicated by a minus sign. Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16. b. If interest rates suddenly fall by 2 percent instead, what is the percentage change in the price of these bonds? Note: Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16. a. Percentage change in price b. Percentage change in price Bond J % % Bond K % %
5. Compute the price of $86,708,402 received for the bonds by using the Present value at compound interest, and Present value of an annuity. Round your PV values to 5 decimal places and the final answers to the nearest dollar. Your total may vary slightly from the price given due to rounding differences. Present value of the face amount 29,058,178 X Present value of the semi-annual interest payments 57,650,184 X Proceeds of bond issue 86,708,402
None
Provide table solutions
You have purchased a U.S. Treasury bond for $3,150.00. No payments will be made until the bond matures 10 years from now, at which time it will be redeemed for $5,150. What interest rate will you earn on this bond? Group of answer choices 6.18% 5.04% 3.73% 5.67% 4.46%
a. An 8 ½%, 25-year, $1,000 bond is presently selling at a yield-to-maturity (YTM) of 9 4%. Assuming annual interest payments, what should you pay for the bond? b. What should you pay if interest is paid semiannually? c. Instead of a 25-year bond, they decide to issue 15-year bonds with annual payments. What should you pay for this bond if the YTM is 9 4%? Explain the differences in prices changes for (3a) and (3c) in terms of maturity. d. You buy an 8%, 15-year, $1,000 bond that pays interest annually when it is selling with a YTM of 7%. Immediately after you buy the bond, the YTM increases to 9%. What was the percentage change in the price of the bond? A bond has a market price that exceeds its face value. What type of bond is this? Describe the relationship between the coupon rate and the YTM. е.

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