**Bond Investment Analysis**You hold two bonds:1. **Bond from Company B**: - Face value: $1,000 - Coupon rate: 5.2% (paid annually) - Time to maturity: 7 years2. **Bond from A Corporation**: - Face value: $1,000 - Coupon rate: 9.2% (paid annually) - Time to maturity: 7 years- The market yield to maturity (YTM) for both bonds is 7.2%.**Questions:**a. **What is the current yield for Bond A? For Bond B?***(Note: Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 12.34.)*b. **If the YTM remains unchanged, what is the expected capital gains yield over the next year for Bond A? For Bond B?***(Hint: You will need to solve for the price of each bond next year to find the capital gains yield.)**(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.)*| | Bond A | Bond B ||----------------------|--------|--------|| a. Current yield | % | % || b. Capital gains yield | % | % |

Yield to maturity is rate of return realized on the bond when bond is held till maturity and all…

You hold two bonds. You own a $1,000 face value bond from Company B that has 5.2% coupons paid once per year seven years to maturity. The other is a $1,000 face value bond from A Corporation that has 9.2% coupons paid once per and seven years to maturity. The market (YTM) for both bonds is 7.2%. a. What is the current yield for Bond A? For Bond B? (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 12.3 b. If the YTM remains unchanged, what is the expected capital gains yield over the next year for Bond A? For Bond B? (Hint: you will need to solve the price of each bond next year to find the capital gains yield. (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and enter your ans as a percent rounded to 2 decimal places, e.g., 32.16.) a. Current yield b. Capital gains yield Bond A % % Bond B % %

You hold two bonds. You own a $1,000 face value bond from Company B that has 5.2% coupons paid once per year seven years to maturity. The other is a $1,000 face value bond from A Corporation that has 9.2% coupons paid once per and seven years to maturity. The market (YTM) for both bonds is 7.2%. a. What is the current yield for Bond A? For Bond B? (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 12.3 b. If the YTM remains unchanged, what is the expected capital gains yield over the next year for Bond A? For Bond B? (Hint: you will need to solve the price of each bond next year to find the capital gains yield. (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and enter your ans as a percent rounded to 2 decimal places, e.g., 32.16.) a. Current yield b. Capital gains yield Bond A % % Bond B % %

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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Consider a bond with a coupon of 5 percent, seven years to maturity, and a current price of $1,052.80. Suppose the yield on the bond suddenly increases by 2 percent. a. Use duration to estimate the new price of the bond. Note: Do not round intermediate calculations. Round your answer to 2 decimal places. Price b. Calculate the new bond price using the usual bond pricing formula. Note: Do not round intermediate calculations. Round your answer to 2 decimal places. Price
Suppose a seven-year, $1,000 bond with a 7.9% coupon rate and semiannual coupons is trading with a yield to maturity of 6.71%. a. Is this bond currently trading at a discount, at par, or at a premium? Explain. b. If the yield to maturity of the bond rises to 7.28% (APR with semiannual compounding), what price will the bond trade for? a. Is this bond currently trading at a discount, at par, or at a premium? Explain. (Select the best choice below.) A. Because the yield to maturity is less than the coupon rate, the bond is trading at a discount. B. Because the yield to maturity is less than the coupon rate, the bond is trading at a premium. C. Because the yield to maturity is greater than the coupon rate, the bond is trading at a premium. D. Because the yield to maturity is greater than the coupon rate, the bond is trading at par. b. If the yield to maturity of the bond rises to 7.28% (APR with semiannual compounding), what price will the bond trade for? The new price of the bond is $…
Do not use excel, use formulas to compute the question You have two bonds, Bond A and bond B: A 3-year zero-coupon bond with face value of $1,000 with a yield-to-maturity of 4%. A 6-year bond with an annual coupon payment C (to be paid out starting a year from now), a face value of $1,000 and yield-to-maturity of 5%. Assume that compounding takes place annually. If the price of Bond A is equal to the price of Bond B, what is the value of Bond B’s coupon payments (C)?
Suppose you want to figure out the relationship between duration and maturity, so you consider the following three T-Bonds. You compute a. The duration of a two-year Treasury bond with a 10 percent semiannual coupon selling at par b. The duration of a three-year Treasury bond with a 10 percent semiannual coupon selling at par c. The duration of a four-year Treasury bond with a 10 percent semiannual coupon selling at par
Suppose a ten-year, $1,000 bond with an 8.4% coupon rate and semiannual coupons is trading for $1,035.65. a. What is the bond's yield to maturity (expressed as an APR with semiannual compounding)? b. If the bond's yield to maturity changes to 9.9% APR, what will be the bond's price? a. What is the bond's yield to maturity (expressed as an APR with semiannual compounding)? The bond's yield to maturity is%. (Round to two decimal places.)
am. 49.
Suppose that you are interested in purchasing a bond issued by the VPI Corporation. The bond is quoted in the Wall Street Journal as selling for 89.665. How much will you pay for the bond if you purchase it at the quoted price? Assuming you hold the bond until maturity, how much will you receive at that time? If you purchase the bond at the quoted price, you would pay $. (Round to the nearest cent) Assuming you hold the bond until maturity, you would receive $ (Round to the nearest dollar)
The return an investor earns on a bond over a period of time is known as the holding period return, defined as interest income plus or minus the change in the bond's price, all divided by the beginning bond price. a. What is the holding period return on a bond with a par value of $1,000 and a coupon rate of 7.5 percent if its price at the beginning of the year was $1,070 and its price at the end was $960? Assume interest is paid annually. Note: Negative value should be indicated by parenthesis. Round your answer to 2 decimal places. Holding period return %
A BBB-rated corporate bond has a yield to maturity of 9.8%. A U.S. Treasury security has a yield to maturity of 8.4%. These yields are quoted as APRS with semiannual compounding. Both bonds pay semiannual coupons at an annual rate of 9.1% and have five years to maturity. a. What is the price (expressed as a percentage of the face value) of the Treasury bond? b. What is the price (expressed as a percentage of the face value) of the BBB-rated corporate bond? c. What is the credit spread on the BBB bonds? a. What is the price (expressed as a percentage of the face value) of the Treasury bond? The price of the Treasury security as a percentage of face value is ☐ %. (Round to two decimal places.)
Suppose that your firm issued a bond with 10 years until maturity, a face value of $1000, and a coupon rate of 7% (annual payments). The yield to maturity on this bond when it was issued was 6%. For questions e-g, assume that this bond DOES NOT pay any coupon a) What was its price when it was issued? b) For this zero-coupon bond, suppose it is actually sold for $500, what should the YTM be?

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