You own a bond redeemable for $400 in 8 years. You just have received a coupon of amount c and each subsequent semi-annual coupon will be 4% larger than the preceding coupon. The book value of this bond immediately after you received the colpon is $808.11 using an annual effective yield of 5%. What is the coupon c? 28.31 O29.54 O 31.00 32.28

You own a bond redeemable for $400 in 8 years. You just have received a coupon of amount c and each subsequent semi-annual coupon will be 4% larger than the preceding coupon. The book value of this bond immediately after you received the colpon is $808.11 using an annual effective yield of 5%. What is the coupon c? 28.31 O29.54 O 31.00 32.28

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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Bhupatbhai
Bond A is a $1,000, 6% quarterly coupon bond with 5 years to maturity.(a) If you bought Bond A today at a yield (APR) of 8%, what is your purchase price? Is this apremium or discount bond? Why?)(b) One year later, Bond A's YTM (APR) has gone down to 6% and you sell it immediately afterreceiving the coupon.(i) What is the current yield? (ii) What is the capital gains yield? (iii) What is the one-year total rate of return (in APR) if the coupons are reinvested at 2%per quarter during the holding period? (iv) Can Bond A’s one-year total rate of return be determined correctly by simply adding upthe current yield and the capital gains yield? Explain your answer without calculations.(c) Consider two other bonds: Bond B and Bond C.Bond B: A $1,000, 7% quarterly coupon bond with 4 years to maturityBond C: A $1,000 zero coupon bond with 2 years to maturity(i) Without calculation, briefly explain which bond in the following pairs has higherinterest rate risk.1) Bond A vs. Bond B 2) Bond B vs.…
2. See the following and check the relevant PPT Examples if needed. Show your steps. A $1,000 par value bond with 12 years to maturity pays a coupon rate of 6%, annually. The bond's yield to maturity is 6.7% per year. You expect the bond's yield to maturity in three years will be 5.9% per year and you can reinvest the bond's coupon payments over the next three years in short- term securities that p pay 4% per year. What is the expected annual return over the next three years? C 5 M
You purchased a bond for 725. The bond has a coupon rate of 8 percent, which is paid semiannually. It matures in 6 years and has a par value of 1,000. What is your expected rate of return?
Today, you just paid $924.22 to buy a semiannual bond with 6 years to maturity. This bond carries 4% coupon rate and $1,000 par value. After exactly one year, the bond’s YTM changes to 3.60%. What is the new price of the bond?
you are considering the purchase of a semiannual bond with a 9% coupon rate, it is trading at $875 and matures at $ 1000 in 25 years. What is the coupon payment on this bond?.
B
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?
You buy a bond today that has a coupon rate of 6.5%, with 10 years to maturity, and is trading at a YTM of 5.6% Assume that one year later, the bond is trading at a YTM of 5.0% What was the annual percentage return you earned by owning the bond? TIP: The annual return on a bond is equal to (Price(1) - P(0) + Coupon Payments)/P(0) See textbook, Section 6.4 Bond Rates of Return. Remember that when you calculate the value of the bond in one year, you will have received two coupons. Also, when you use the above formula, the prices of the bonds P(0) and P(1), as well as the coupons, should be calculated as dollars, not percentages of par value.
4. A bond with a coupon rate of 7.30% has a price that today equals $868.92. The $1,000 face value bond pays coupon every 6 months, 30 coupons remain, and a coupon was paid yesterday. Suppose you buy this bond at today’s price and hold it so that you receive 20 coupons. You sell the bond upon receiving that last coupon. Find the selling price if the bond’s YTM remains constant.
A bond pays a coupon of $35 semi-annually. The bond matures in 9 years and you will receive $1,000 at that time. If the required return is 9%, how much should you be willing to pay for the bond today? Round to 2 decimal places. Include a dollar sign ($) or percent (%) as appropriate. Answer

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