You just purchased a 15-year bond with an 11 percent annual coupon. The bond has a face value of$1,000 and a current yield of 10 percent. Assuming that the yield to maturity of 9.7072 percent remainsconstant, what will be the price of the bond one year from now?01.000 You just purchased a 15-year bond with an 11 percent annual coupon. The bond has a face value of$1,000 and a current yield of 10 percent. Assuming that the yield to maturity of 9.7072 percent remainsconstant, what will be the price of the bond one year from now?01.000

Explanation of Coupon Rate: The coupon rate is the fixed percentage of the bond's face value that…

Answered: You just purchased a 15-year bond with…

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter4: Bond Valuation

Section: Chapter Questions

Problem 8MC: Suppose a 10-year, 10% semiannual coupon bond with a par value of 1,000 is currently selling for...

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Suppose a 10-year, 10% semiannual coupon bond with a par value of 1,000 is currently selling for 1,135.90, producing a nominal yield to maturity of 8%. However, the bond can be called after 5 years for a price of 1,050. (1) What is the bonds nominal yield to call (YTC)? (2) If you bought this bond, do you think you would be more likely to earn the YTM or the YTC? Why?
Yield to Maturity and Yield to Call Arnot International’s bonds have a current market price of $1,200. The bonds have an 11% annual coupon payment, a $1,000 face value, and 10 years left until maturity. The bonds may be called in 5 years at 109% of face value (call price = $1,090). What is the yield to maturity? What is the yield to call if they are called in 5 years? Which yield might investors expect to earn on these bonds, and why? The bond’s indenture indicates that the call provision gives the firm the right to call them at the end of each year beginning in Year 5. In Year 5, they may be called at 109% of face value, but in each of the next 4 years the call percentage will decline by 1 percentage point. Thus, in Year 6 they may be called at 108% of face value, in Year 7 they may be called at 107% of face value, and so on. If the yield curve is horizontal and interest rates remain at their current level, when is the latest that investors might expect the firm to call the bonds?
Suppose you purchase a zero coupon bond for $214.55 with a face value of $1,000 maturing in twenty years. If the yield to maturity (YTM) on the bond is 8.00%, what will the price of the bond be at the end of five years from now?
Example: You buy a 10-year maturity bond for the face value of $1,000 when the current interest rate is 9%. A year later, you sell the bond for $980. Assuming annual coupon payment, a. What is the new yield to maturity on the bond when you sell the bond? b. What's your holding period return during the year?
You buy an 8.9% coupon, paid annually, 8-year maturity bond for $945. A year later, the bond price is $1,055. Face value of the bond is $1,000. a. What is the yield to maturity on the bond today? What is the yield to maturity on the bond in one year? b. What is your rate of return over the year?
You buy a bond for $991 that has a coupon rate of 5.90% and a maturity of 10-years. A year later, the bond price is $1,176. (Assume a face value of $1,000 and annual coupon payments.) What is the new yield to maturity on the bond? Note: Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. What is your rate of return over the year? Note: Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.
A 20-year bond with a par value of $1,000 has a 9 percent annual coupon. The bond currently sells for $925. If the bond's yield to maturity (YTM) remains at its current rate, at what price do you expect the bond to sell a year from now? If it helps, you may use the approximation formula to compute the bond's ΥTM.
Suppose you purchase a zero coupon bond with a face value of $1,000 and a maturity of 25 years, for $233. If the yield to maturity on the bond remains unchanged, what will the price of the bond be 5 years from now?
A bond with a face value of $1,000 has 10 years until maturity, carries a coupon rate of 9%, and sells for $1,100. Interest is paid annually. Assume a face value of $1,000 and annual coupon payments.a) If the bond has a yield to maturity of 9% 1 year from now, what will its price be at that time?b) What will be the rate of return on the bond? c) If the inflation rate during the year is 3%, what is the real rate of return on the bond? Assume annual interest payments.
Consider the following annual coupon bond with a face value of $1,000, a price of $986.24, a coupon rate of 5.9% and a maturity of 30 years. Right after you purchase the bond, market interest rates change to 12% and remain constant for the next ten years. What would be your realized yield to maturity if you sold the bond after 10 years?
What is the semi-annual coupon bond's nominal yield to maturity (YTM), if the years to maturity is 15 years, and sells for 119% with coupons rate of 10%? Assume the par value of the bond is $1,000.
You purchase a 3-year coupon bond at the par value today. The information of this coupon bond is shown below: annual coupon rate: 10% face value: $1,000 What is the YTM of this bond today? Suppose the annual reinvestment rate is 8% for the next two years. What is the realized compound yield if you sell this bond at the end of year 2? O a. 10 % ; 10.75% O b. 10%; 10% O c. 10.75%; 10.75% O d. 8%; 9% k

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