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…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter6: Fixed-income Securities: Characteristics And Valuation

Section: Chapter Questions

Problem 8P

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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?
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 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
suppose you bought a 5- year-zero coupon Treasury bond for $800 per $1000 face value. Assume the yield to maturity on comparable bonds increases to 7% after you purchase the bond and remains there.Calculate your holding period return(annual return) if you sell the bond after one year.
A bond with 5 years to maturity, a face value of $2,000 and a coupon rate of 8.0% is selling for $1750. What is its yield to maturity? If the yield changes to 8.0%, what will be the new price of the bond? (Assume annual coupon payments.)
Consider a bond with a face value of $2,000 that pays a coupon of $150 for 10 years. Suppose the bond is purchased at $500, and can be resold next year for $400. What is the yield to maturity of the bond? 30% 0% 35.4% 100.2%
A bond has a $1000 par value, 12 years to maturity and an 8% annual coupon and sells for $980. What is its yield to maturity? Assume that the yield to maturity remains constant for the next three yearts. What will the price be 3 yearts from today?

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