a(i)
To calculate:
The
Introduction:
Price at which investor can be purchased a bond, that be called bond price or the price at which the bond can be redeemed on maturity.
a(i)
Answer to Problem 38PS
Price of Zero coupon bond having yield to maturity is
Explanation of Solution
Given:
Coupon rate
Face value
Price of the bond
Where,
PV is
PMT is coupon payment,
a(ii)
To calculate:
The bond price if yield to maturity is
Introduction:
Price at which investor can be purchased a bond, that be called bond price or the price at which the bond can be redeemed on maturity.
a(ii)
Answer to Problem 38PS
Price of
Explanation of Solution
Given:
Coupon rate
Face value
Price of the bond
Where
PV is present value on which bond can be purchased
PMT is coupon payment i.e. $80
a(iii)
To calculate:
The bond price if yield to maturity is
Introduction:
Price at which investor can be purchased a bond, that be called bond price or the price at which the bond can be redeemed on maturity.
a(iii)
Answer to Problem 38PS
Price of
Explanation of Solution
Given:
Coupon rate
Face value
Price of the bond
Where,
PV is present value on which bond can be purchased
PMT is coupon payment i.e. $100
b(i)
To calculate:
The bond price if yield to maturity is
Introduction:
Price at which investor can be purchased a bond, that be called bond price or the price at which the bond can be redeemed on maturity.
b(i)
Answer to Problem 38PS
Price of zero coupon bonds having yield to maturity is
Explanation of Solution
Given:
Coupon rate
Face value
We stand on next year so total year of maturity on the beginning of next year is
Price of the bond
Where,
PV is present value on which bond can be purchased
PMT is coupon payment i.e. $100
b(ii)
To calculate:
The bond price if yield to maturity is
Introduction:
Price at which investor can be purchased a bond, that be called bond price or the price at which the bond can be redeemed on maturity.
b(ii)
Answer to Problem 38PS
Price of
Explanation of Solution
Given:
Coupon rate
Face value
We stand on next year so total year of maturity on the beginning of next year is
Price of the bond
Where,
PV is present value on which bond can be purchased
PMT is coupon payment i.e.
b(iii)
To calculate:
The bond price if yield to maturity is
Introduction:
Price at which investor can be purchased a bond, that be called bond price or the price at which the bond can be redeemed on maturity.
b(iii)
Answer to Problem 38PS
Price of
Explanation of Solution
Given:
Coupon rate
Face value
We stand on next year so total year of maturity on the beginning of next year is
Price of the bond
Where,
PV is present value on which bond can be purchased
PMT is coupon payment i.e.
c(i)
To calculate:
The
Introduction:
Return is a profit on an investment. So rate of return is a profit over a period of time of investment. It expressed as percentage of the original investment.
c(i)
Answer to Problem 38PS
Rate of return on zero coupon bonds having yield to maturity is
Explanation of Solution
Given:
Coupon rate
Face value
PV as per
PV as per
Total Income on bond including coupon income is
Rate of return on the bond
c(ii)
To calculate:
The rate of return on
Introduction:
Return is a profit on an investment. So rate of return is a profit over a period of time of investment. It expressed as percentage of the original investment.
c(ii)
Answer to Problem 38PS
Rate of return on
Explanation of Solution
Given:
Coupon rate
Face value
PV as per
PV as per
Here, formula to calculate and given are added followed by a detailed explanation / working out the complete problem.
Total Income on bond including coupon income is
Rate of return on the bond
c(iii)
To calculate:
The rate of return on
Introduction:
Return is a profit on an investment. So rate of return is a profit over a period of time of investment. It expressed as a percentage of the original investment.
c(iii)
Answer to Problem 38PS
Rate of return on
Explanation of Solution
Given,
Coupon rate
Face value
PV as per
PV as per
Total Income on bond including coupon income is
Rate of return on the bond
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Chapter 10 Solutions
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