You have just purchased a newly issued 1000$ five year vanguard company bond at par,with 12% coupon paid semianualy: the company has issued another bond with a coupon of 6% paid semi annually with six years remaining to maturity assuming that these two bones have the same yield to maturity what should you be willing to pay for that Bond? B) ASSUMING that after one year, the yield increaes by 1% calculate the capital gain for both bonds

You have just purchased a newly issued 1000$ five year vanguard company bond at par,with 12% coupon paid semianualy: the company has issued another bond with a coupon of 6% paid semi annually with six years remaining to maturity assuming that these two bones have the same yield to maturity what should you be willing to pay for that Bond? B) ASSUMING that after one year, the yield increaes by 1% calculate the capital gain for both bonds

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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The ARA Corporation bonds have a coupon of 14%, pay interest semiannually, and they will mature in 7 years. Your required rate of return for such an investment is 10% annually. Required: (a) How much should an investor pay for a $1,000 ARA Corporation bond? (b) Discuss reasons why an investor should choose to purchase bonds over stocks given his risk profile.
A firm considers to invest in two zero-coupon bonds (A and B) in order to cover for a selection of its future liabilities. These zero-coupon bonds will be redeemed in 7 years' and in 20 years' time, respectively. The given selection of its liabilities consist of £11 million due in 11 years' time and £14 million due in 16 years' time. Find the value of bond B at a rate of interest of 5% per annum effective such that the first two conditions for Redington's theory of immunisation are satisfied
Assume the coupon rate is 10% issue at par $1000 and for 15 years. Let say the market interest rate increase to 15% during the life of the bond. a) What is the interest payment for this bond annually b) What is the interest payment on semi-annually c) How much should the investors pay for this bondi.e. the value
An investor holds a callable bond of BD Motors Ltd. with a face value of BDT 15,000, a coupon rate of 6%, and 20 years to maturity. The bond becomes callable in 12 years at a call price of BDT 16,500. Given that the current market price is BDT 17,800, calculate the yield of holding BD Motors' bond until it is called. b. What would be the yield if the call price were BDT 18,500? Does the Yield to Call (YTC) increase or decrease? Briefly explain your understanding.
Suppose your firm issues a €100,000,000 5-year bond with a coupon rate of 8% per annum (assume annual compounding). The bond will sell at face value to investors. The underwriting spread is an up-front fee of 2%. What is the actual cost of this debt? Please enter your answer as % -- e.g. if your answer is 2.34% type in 2.34.
you are interested in a corporate bond with a current market price of $973.36 and yield to a maturity of 7%. the bond carries a coupon rate of 6%, paid semi annually. if you buy the bond today, how many semi- annual coupon payments will you receive until the final maturity?
Consider a 5-year coupon bond with a face value of $1,000. The bond matures five years from today and pays a coupon of 5% per annum. It has a YTM of 5% at time 0, a YTM of 6% at time 1, a YTM of 8% at time two and a YTM of 10% for time 3 and 4 and 30% at time 5. Assume the investor who owns this bond reinvests the coupons every year at the prevailing rate, and the yield curve is flat through the bond's life. Cashflows are paid annually.What is the annualized rate of return of this investor? Group of answer choices 4.12% 5.0% 1.5 5.39% 8.12% 10.0%
An investor has two bonds in his portfolio that have a face value of $1,000 and pay an 11% annual coupon. Bond L matures in 16 years, while Bond S matures in 1 year. What will the value of the Bond L be if the going interest rate is 6%, 7%, and 12%? Assume that only one more interest payment is to be made on Bond S at its maturity and that 16 more payments are to be made on Bond L. Round your answers to the nearest cent.
You are considering buying bonds in AZYX The bonds have a par value of 1.000 and mature in 12 years . The annual coupon rate is 13.0% and the coupon payments are annual The bonds are currently selling for $1,376.80 based on a yield- to-maturity of 8.0%What is the bond's expected capital gain /loss if the bonds are held until maturity ?
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

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