INVESTMENTS-CONNECT PLUS ACCESS
11th Edition
ISBN: 2810022611546
Author: Bodie
Publisher: MCG
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Chapter 14, Problem 17PS
Summary Introduction
To Discuss:
Whether the coupon rate of the bond in the previous problem is more or less than 9%
Introduction:
A bond is a security that creates an obligation on the issuer to make specified payments to the holder for a given period of time.
The face
Yield to maturity is termed as the discount rate that makes the present payments from the bond and its price are equal. In simple terms, it is the average
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Students have asked these similar questions
Consider a bond with a face value of $1000. An increase and decrease in 1 bp results in the price changing to 995.12707 and 996.09333, respectively. What is its PVBP?
7-42 Spreadsheet Problem You have a portfolio of three bonds. The long bond will mature in 19 years and has a 5.5%
coupon rate. The midterm bond matures in 9 years and has a 6.6% coupon rate. The short bond matures in only 2 years and has a
4% coupon rate.
a. Construct a spreadsheet that shows the value of these three bonds and the portfolio when the discount rate is 5%. The
spreadsheet can look something like this:
A
B
D
E
1
Now
Change to
2 Interest rate =
5.00%
5.50%
3 Bonds
Bond Price Now Price After Change Change in $ Change in %
4 Long bond
5 Midterm bond
6 Short bond
7
Total =
$0.00
$0.00
図
14. Bond ABC has a current yield of 5% and Bond DEF has a current yield of 7%.If the market price of both bonds is similar, then the YTM on Bond DEF should be higher than the YTM on Bond ABC. Is this true or false? Why?
Chapter 14 Solutions
INVESTMENTS-CONNECT PLUS ACCESS
Ch. 14 - Prob. 1PSCh. 14 - Prob. 2PSCh. 14 - Prob. 3PSCh. 14 - Prob. 4PSCh. 14 - Prob. 5PSCh. 14 - Prob. 6PSCh. 14 - Prob. 7PSCh. 14 - Prob. 8PSCh. 14 - Prob. 9PSCh. 14 - Prob. 10PS
Ch. 14 - Prob. 11PSCh. 14 - Prob. 12PSCh. 14 - Prob. 13PSCh. 14 - Prob. 14PSCh. 14 - Prob. 15PSCh. 14 - Prob. 16PSCh. 14 - Prob. 17PSCh. 14 - Prob. 18PSCh. 14 - Prob. 19PSCh. 14 - Prob. 20PSCh. 14 - Prob. 21PSCh. 14 - Prob. 22PSCh. 14 - Prob. 23PSCh. 14 - Prob. 24PSCh. 14 - Prob. 25PSCh. 14 - Prob. 26PSCh. 14 - Prob. 27PSCh. 14 - Prob. 28PSCh. 14 - Prob. 29PSCh. 14 - Prob. 30PSCh. 14 - Prob. 31PSCh. 14 - Prob. 1CPCh. 14 - Prob. 2CPCh. 14 - Prob. 3CPCh. 14 - Prob. 4CPCh. 14 - Prob. 5CP
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- H5. Which of the following is the name of the semiannual payment of $20 that you receive on a bond you own? a. Face Value b. Discount c. Yield d. Call Premium e. Coupon Explain with details and also explain wrong optionsarrow_forwardWhich one of the following will decrease the current yield of a bond? changing the frequency of coupon payment from semi-annual to annual. increasing the face value. increasing the coupon rate. decreasing the yield to maturity. decreasing the bond price.arrow_forwardHow do investors calculate the net present value of a bond? If a bond's coupon payment is C, the interest rate is R, and the bond's coupon payment is made in each period for T years at which time the original principal, P, is repaid, then the bond's present discounted value (PDV) is C A. PDV = + (1 + R) (1 + R? (1 + R)T B. PDV = C(1 + R) + C(1 + R)2 - + C(1 + R)T + P(1 + R)T + C P OC. PDV = - + R R2 RT RT C D. PDV = P + C C (1 + R) (1+R)2 (1 + R)T C E. PDV = + + + + (1 + R) (1+ R)2 (1 + R)T (1 + R)T If the interest rate is 9 percent, what is the present value of a perpetuity that pays $50,000 each year, forever? The perpetuity's value is $ (Enter a numeric response rounded to two decimal places.)arrow_forward
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