You are interested in a zero-coupon bond with one year left to maturity. The bond has the face value of $1,000. You believe that the issuer will not default with 95% probability. However, with 5% probability, the issuer will default, and you will recover only a fraction of the promised payment. If the expected return 8% and the promised yield is 11.34%, how much do you recover in case of default? $400 $440 $415 $385 $425

You are interested in a zero-coupon bond with one year left to maturity. The bond has the face value of $1,000. You believe that the issuer will not default with 95% probability. However, with 5% probability, the issuer will default, and you will recover only a fraction of the promised payment. If the expected return 8% and the promised yield is 11.34%, how much do you recover in case of default? $400 $440 $415 $385 $425

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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Use the following information to answer the question(s) below. Suppose that a default-risk-free zero-coupon bond with a face value of $100 and 5 years to maturity is currently trading at $60. Another bond with the same face value and time to maturity but at risk of defaulting sells for $30. (If this risky bond defaults, there is a 70% chance that 30% of the face value will be recovered and a 30% chance that 50% of the face value will be recovered.) Also, suppose the spread between the expected zero rates of the two bonds is 5% pa. What must be the default probability of the second bond (risky bond)? Choose the closest answer. O 47.66% 58.82% 37.32% None of the other answers are correct. O 67.23%
A 6.60 percent coupon bond with 15 years left to maturity is priced to offer a 5.3 percent yield to maturity. You believe that in one year, the yield to maturity will be 6.0 percent. What would be the total return of the bond in dollars? (Assume interest payments are semiannual) (Negative amount should be indicated by a minus sign. Do not round intermediate calculations. Round your final answer to 2 decimal places.) Total return S 10 47 What would be the total return of the bond in percent? (Assume interest payments are semiannual) (Negative answer should be indicated by a minus sign. Do not round intermediate calculations. Round your final answer to 2 decimal places.) Total return
Bond X is noncallable and has 20 years maturity, a 9% annual ciupon, and a $1,000 par value. Your required return on bond X is 10% and if you buy it, you plan to hold it for 5 years. You (and the market) have expectations that in 5 years, the yield to maturity on a 15— year bond with similar risk will be 8.5%. How much should you be willing to pay for Bond X today? Please show formula and computation, not in spreadsheet
Nikul
Bond X is noncallable and has 20 years to maturity, an 11% annual coupon, and a $1,000 par value. Your required return on Bond X is 10%; if you buy it, you plan to hold it for 5 years. You (and the market) have expectations that in 5 years, the yield to maturity on a 15-year bond with similar risk will be 10.5%. How much should you be willing to pay for Bond X today? (Hint: You will need to know how much the bond will worth at the end of 5 years.) Do not round Intermediate calculations. Round your answer to the nearest cent. $
The market price of a bond is $825.60, it has 15 years to maturity, a $1000 face value, and pays an annual coupon of $80. What is the yield to maturity? Please do not use Excel. I need help inputting this in my TI-84 Plus CE calculator
Adidas issued a zero-coupon bond with a five-year maturity and a $100 face value. You believe there is a 20% chance that they will default, and if they do default, you expect to receive only 55 cents per dollar of what you are promised. If you require a 6% expected return on this investment: a. what will be the price of these bonds, and 2. what will be the yield to maturity on these bonds? Note: Assume annual compounding. Question content area bottom Part 1 a. The price of these bonds is $enter your response here. (Round to the nearest cent.) b. The yield to maturity on these bonds is enter your response here%. (Round to two decimal places.)
How much would you pay for a perpetual bond that pays an annual coupon of $200 per year and yields on competing instruments are 10%? You would pay $ 2000. (Round your response to the nearest penny) If competing yields are expected to change to 12%, what is the current yield on this same bond assuming that you paid $2,000? The current yield is 10%. (Round your response to the nearest integer.) If you sell this bond in exactly one year, having paid $2,000, and received exactly one coupon payment, what is your total return if competing yields are 12%? Your total return is %. (Round your response to two decimal places)
Needs Complete solution with 100 % accuracy.
Find the price of a 2.00% coupon bond with a face value of $10000, a 12% yield tomaturity, and 5 years to maturity. Round your answer to two decimal places. Don't enter the dollar ($) symbol.
Consider a long-term, zero coupon bond that has a face value of $100,000 and matures in thirteen years. If you require a return of 4.52%, what are you willing to pay for the instrument today? $56,286.96 $53,852.81 $95,675.47 $177,661.05
The yield on a 1-year zero-coupon bonds is currently 7%; the YTM on 2 -year zeros is 8%. The treasury plans to issue a 2 -year maturity coupon bond, paying coupons once a year with a coupon rate of 9%. The face value of the bond is $100. (BKM 15.11) a) At what price will the bond sell? 15 p b) If the expectations theory of the yield curve is correct, what is the market expectation of the price that the bond will sell for next year? c) Recalculate your answer to b) if you believe in the liquidity preference theory and you believe the liquidity premium is 1%.

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