Yesterday you paid S1000 for a 6% coupon, $1000 facc value 5-ycar bond. It is callable at the end ycar I(ater it makes the firsı ycar-cnd coupon payment) for S1100, The annual discount rate on this bond has justfallen to 2%. What will this bond be selling for today? If you had intended to hold this bond until it matured,how much moncy did the call provision cost you in total over all five ycars?

Price of bond = present value of coupon and principal P = I(1-(1+r)-p)/r + F/(1+r)P Where, I =…

Answered: Yesterday you paid S1000 for a 6%…

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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A few years ago, Zabar Technology issued an annual bond that has a face value equal to $1,000 and pays investors $40 interest semiannually. The bond has four years remaining until maturity. If an investor requires a 5% rate of return to invest in this bond, what is the maximum price he or she should be willing to pay to purchase the bond today? O $1,106.38 O $964.54 O $1,107.55 $935.37
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You have just purchased a 10-year bond with a 6.375% coupon rate, coupons paid annually, with a YTM of 8%. Face value is $1000. Moments after you purchase this bond, the Federal Reserve Open Markets Committee announces that they will cut interest rates by 1%. By what percentage will your bond increase in value? Since this is basically an instantaneous change, assume that NPER = 10 in all y ****NOTE 7.18 is INCORRECT -- redoing this with HPR formula, i get 15.44, is this correct? **** I your calculations.
You buy a bond today that has a coupon rate of 6.5%, with 10 years to maturity, and is trading at a YTM of 5.6% Assume that one year later, the bond is trading at a YTM of 5.0% What was the annual percentage return you earned by owning the bond? TIP: The annual return on a bond is equal to (Price(1) - P(0) + Coupon Payments)/P(0) See textbook, Section 6.4 Bond Rates of Return. Remember that when you calculate the value of the bond in one year, you will have received two coupons. Also, when you use the above formula, the prices of the bonds P(0) and P(1), as well as the coupons, should be calculated as dollars, not percentages of par value.
Fixed Income Securities4. Today is t = 0. You have just bought a five-year zero-coupon Treasurybond with $100 face value. You paid $80.(a) What is the annually compounded yield to maturity on the bond?(b) Suppose that yields at all maturities decrease to 2% immediately after you havepurchased the bond. Calculate the annualized holding period return if you sellthe bond one year after you have purchased it, at t = 1.(c) What is the annually compounded yield to maturity on the bond at t = 1?
Yesterday you paid $1000 for a 6% coupon, $1000 face value 5-year bond. It is callable at the end year 1(after it makes the first year-end coupon payment) for $1100. The annual discount rate on this bond has just fallen to 2%. What will this bond be selling for today? If you had intended to hold this bond until it matured, how much money did the call provision cost you in total over all five years?
You bought a 25-year, 6.8% semi-annual coupon bond today and the current market rate of return is 5.3%. The bond is callable in 7 years with a $1,087 call premium. What price did you pay for your bond? (Show your answer to nearest cent with no comma. For example $1,378.565 is entered as 1378.57)

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