Question

In: Finance

Two corporate bonds are not callable, both have the FV = $1,000, paying coupon per 180...

Two corporate bonds are not callable, both have the FV = $1,000, paying coupon per 180 days (360 days a year).

Bond A has c = 3%, maturity = 10.5 years, YTM = 3%.

Bond B has c = 5%, maturity = 2 years, YTM = 2%.

Using $1,000,000 to create a portfolio with A & B. If the portfolio contains 20% of bond A and 80% of bond B, calculate the number of bond A and bond B.

Please show you workings.

Solutions

Expert Solution

Calculations-

Please upvote if the ans is helpful.In case of doubt,do comment.Thanks.

jeff jeffy answered 2 years ago
Next > < Previous

Related Solutions

A 20-year maturity $1,000 par value 9% coupon bond paying coupons annually is callable in five...
A 20-year maturity $1,000 par value 9% coupon bond paying coupons annually is callable in five years at a call price of $1,050. The bond currently sells at a yield to maturity of 8%. What is the yield to call? please show full steps of the work. thank you!!!
Bowdeen Manufacturing intends to issue callable, perpetual bonds with annual coupon payments. The bonds are callable...
Bowdeen Manufacturing intends to issue callable, perpetual bonds with annual coupon payments. The bonds are callable at $1,240. One-year interest rates are 11 percent. There is a 60 percent probability that long-term interest rates one year from today will be 12 percent, and a 40 percent probability that they will be 10 percent. Assume that if interest rates fall the bonds will be called. What coupon rate should the bonds have in order to sell at par value? Assume a...
Bowdeen Manufacturing intends to issue callable, perpetual bonds with annual coupon payments. The bonds are callable...
Bowdeen Manufacturing intends to issue callable, perpetual bonds with annual coupon payments. The bonds are callable at $1,220. One-year interest rates are 10 percent. There is a 60 percent probability that long-term interest rates one year from today will be 12 percent, and a 40 percent probability that they will be 9 percent. Assume that if interest rates fall the bonds will be called. What coupon rate should the bonds have in order to sell at par value? Assume a...
Z Manufacturing intends to issue callable, perpetual bonds w/ annual coupon payments. The bonds are callable...
Z Manufacturing intends to issue callable, perpetual bonds w/ annual coupon payments. The bonds are callable at $1,250. One-year interest rates are 11 percent. There is a 60 percent probability that long-term interest rates one year from today will be 13 percent, and a 40 percent probability that they will be 9 percent. Assume that if interest rates fall the bonds will be called. What coupon rate should the bonds have in order to sell at par value?
Masters Corp. issues two bonds with 20-year maturities. Both bonds are callable at $1,050. The first...
Masters Corp. issues two bonds with 20-year maturities. Both bonds are callable at $1,050. The first bond is issued at a deep discount with a coupon rate of 4% and a price of $580 to yield 8.4%. The second bond is issued at par value with a coupon rate of 8.75%. a. What is the yield to maturity of the par bond and why? Why is it higher than the yield of the discount bond? b. If you expect rates...
3. Masters Corp. issues two bonds with 20-year maturities. Both bonds are callable at $1,050 in...
3. Masters Corp. issues two bonds with 20-year maturities. Both bonds are callable at $1,050 in two years. The first bond is issued at a deep discount with a coupon rate of 4% and a price of $600 to yield 11.03%. The second bond is issued at par value with a coupon rate of 10%. Coupon is paid annually a) What is the YTM of the par bond? b) If you expect rates to fall to 5% in the next...
Consider a bond (with par value = $1,000) paying a coupon rate of 8% per year...
Consider a bond (with par value = $1,000) paying a coupon rate of 8% per year semiannually when the market interest rate is only 5% per half-year. The bond has three years until maturity. a. Find the bond's price today and six months from now after the next coupon is paid. (Round your answers to 2 decimal places.) Current price Price after 6 months b. What is the total (six-month) rate of return on the bond? (Do not round intermediate...
Consider a bond (with par value = $1,000) paying a coupon rate of 9% per year...
Consider a bond (with par value = $1,000) paying a coupon rate of 9% per year semiannually when the market interest rate is only 5% per half-year. The bond has three years until maturity. a. Find the bond's price today and six months from now after the next coupon is paid. (Round your answers to 2 decimal places.) b. What is the total (six-month) rate of return on the bond? (Do not round intermediate calculations. Round your answer to the...
Consider a bond (with par value = $1,000) paying a coupon rate of 9% per year...
Consider a bond (with par value = $1,000) paying a coupon rate of 9% per year semiannually when the market interest rate is only 7% per half-year. The bond has three years until maturity. a. Find the bond's price today and six months from now after the next coupon is paid. (Round your answers to 2 decimal places.) b. What is the total (six-month) rate of return on the bond? (Do not round intermediate calculations. Round your answer to the...
An investor has two bonds in his portfolio that both have a face value of $1,000...
An investor has two bonds in his portfolio that both have a face value of $1,000 and pay a 8% annual coupon. Bond L matures in 14 years, while Bond S matures in 1 year. Assume that only one more interest payment is to be made on Bond S at its maturity and that 14 more payments are to be made on Bond L. What will the value of the Bond L be if the going interest rate is 5%?...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT