### Bond Pricing Question**Question:** Which $1,000 Face Value Bond below will trade at a *premium* to its Face Value?#### Bond Details| Bond | Coupon (paid annually) | Yield To Maturity | Maturity ||--------|------------------------|-------------------|-----------|| Bond A | 10% | 8% | 5 - years || Bond B | 12% | 14% | 5 - years || Bond C | 9% | 9% | 5 - years |**Options:**- Bond C- None of the bonds- Bond B- Bond A#### Explanation:A bond will trade at a premium when its coupon rate is higher than its yield to maturity. Here:- **Bond A**: Coupon rate (10%) > Yield to maturity (8%) - **Bond B**: Coupon rate (12%) < Yield to maturity (14%) - **Bond C**: Coupon rate (9%) = Yield to maturity (9%) Thus, Bond A will trade at a premium.

Bond is said to be issued at premium , if issue price of bond is greater than face value of…

Answered: Which $1,000 Face Value Bond below will…

Which $1,000 Face Value Bond below will trade at a premium to its Face Value? Bond Bond A Bond B Bond C Coupon (paid annually) 10% 12% 9% Yield To Maturity 8% 14% 9% Maturity 5-years 5-years 5-years

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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Boxer Corp is issuing $600,000 8% 5 year bonds when bond investors want a return of 10%. Interest is payable semiannually Caculate Present Value of Bond Calculate Present Value of Interest Payments What is selling price of bond? did the bond sell at face value discount or premium?
Suppose a 4-year, 3% annual coupon payment bond has the following sequence of spot rates: Time to maturity Spot rates 1 year 0.39% 2 years 1.40% 3 years 2.50% 4 years 3.60% Assume a par value of $100. What is the yield to maturity for this bond? A. 4.52% B. 3.52% C. 5.12% D. 6.12%
Question 4 Consider the following three bonds: Bond P Bond Q Bond R $1,000 $1,000 $1,000 Par Value Coupon Rate Time to Maturity 5.00% 5.50% 0% 3 years 5 years 6 years Required Yield 4.00% 7.00% 5.20% (a) Explain the term "coupon rate". (b) Calculate the present values of each bond. State whether the bond is above par, at par or below par. (c) Bond ratings are an important element of the bond market. Explain what bond ratings are, who issues the ratings, and what the ratings mean to the average investor.
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Problem 7-21 Compute Bond Price (LG7-4) Compute the price of a 5.8 percent coupon bond with 10 years left to maturity and a market interest rate of 9.4 percent. (Assume interest payments are semiannual.) (Do not round intermediate calculations and round your final answer to 2 decimal places.) Bond price $ Is this a discount or premium bond? Discount bond Premium bond
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Question 1: Valuing Bonds a. A firm issues a zero-coupon bond with a face value of $1,000, maturing in five years. Bonds with similar risk are currently yielding 5 percent per year. What is the value of the bond? b. A firm issues a bond with a face value of $1,000 and a coupon rate of 5 percent per year, maturing in five years. Bonds with similar risk are currently yielding 5 percent per year. What is the value of the bond? c. A firm issues the same bond as in part (b) but with an annual coupon rate of 4 percent per year. What is the value of the bond?

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