Roy Orbison wants to invest in a 10 year Treasury bond with a 41/4% coupon...

Roy Orbison wants to invest in a 10 year Treasury bond with a 4 1/4% coupon interest rate. He'd like to earn a yield to maturity of 4.65%. The most he should pay per $100 in face value to earn this yield is:

Solutions

Expert Solution

coupon rate = 4.25%

yield to maturity = 4.65%

face value of bond = $ 100

maturity period = 10 years

current price of bond = 100*4.25%*PVIFA(4.65%,10years) + 100*PVIF(4.65%,10year)

= 4.25*7.854683 + 100*0.634757

= 33.3824 + 63.4757

= 96.858

the most he should pay per $ 100 in face value to earn this yield is $ 96.858.

jeff jeffy answered 2 years ago

Next > < Previous

Related Solutions

Roy Orbison wants to invest in a 5-year Treasury bond with a 3 3/4% coupon interest...

Roy Orbison wants to invest in a 5-year Treasury bond with a 3 3/4% coupon interest rate. He'd like to earn a yield to maturity of 3.90%. The most he should pay per $100 in face value to earn this yield is:

Suppose that you invest in a two-year Treasury bond with a coupon rate of 6% and...

Suppose that you invest in a two-year Treasury bond with a coupon rate of 6% and $1,000 par. Suppose that you buy this bond at a price of exactly $1,000. You intend to hold this bond to maturity and reinvest the coupons until the bond matures. You expect to reinvest the coupons in an account that pays an APR of 1.23%, with semi-annual compounding. What is the effective annual rate of return on your investment? Hint: see Example 8 in...

A 30-yr Treasury bond with a coupon yield of 10% and a 5-yr Treasury bond with...

A 30-yr Treasury bond with a coupon yield of 10% and a 5-yr Treasury bond with a coupon yield of 3% have different yields because: A. Inflation is expected to diminish the value of money B. The yield curve is inverted C. Lenders demand compensation for the longer time frame D. The yield curve is flat E. Both A & C

Mary wants to invest her recent bonus in an eight-year bond that pays a coupon of...

Mary wants to invest her recent bonus in an eight-year bond that pays a coupon of 9 percent annually. The bonds are selling at $1,125.46 today. If she buys this bond and holds it to maturity, what would be her yield?

Three investors invest in the same 10-year 8% annual coupon bond. They bought the bond at...

Three investors invest in the same 10-year 8% annual coupon bond. They bought the bond at the same price ($85.503075 for a par value of $100) and at the same time. A is a buy-and-hold investor (hold till maturity), B will sell the bond after four years, and C will sell the bond after seven years. What is the yield to maturity of this bond? For each of these three investors, find the total cash flow (in dollar amount) at...

Suppose a 10-year zero coupon Treasury bond with a face value of $10, 000 sells for $6,000.

Suppose a 10-year zero coupon Treasury bond with a face value of $10, 000 sells for $6,000. a. Find the bond value. b. Suppose the price of the above bond rose to Kshs 7,500, find the new yield. c. Explain what happens when interest rates increase.

9. a. You’re considering buying a 10 year US Treasury 7% coupon bond with a face...

9. a. You’re considering buying a 10 year US Treasury 7% coupon bond with a face value of $1000. The bond pays coupons semi-annually. The next coupon will be paid in 6 months. The bond is currently selling for $977.12. Using Excel’s IRR command, determine the YTM of the bond. Express your answer as an effective annual rate (EAR). (Not at an APR). Report your answer as a decimal, not as a percent, using at least 4 significant digits....

Compute the duration and convexity of a 10-year Treasury bond, with coupon 3% and price 102-13....

Compute the duration and convexity of a 10-year Treasury bond, with coupon 3% and price 102-13. Note: 1. Treasuries are semiannual. 2. The price quote “aaa-bb” means aaa+b/32 dollars. 3. Treasuries are non-callable bonds

The duration of an 11-year, $1,000 Treasury bond paying a 10 percent annual coupon and selling...

The duration of an 11-year, $1,000 Treasury bond paying a 10 percent annual coupon and selling at par has been estimated at 6.763 years. What will be the new price of the bond if interest rates increase 0.10 percent (10 basis points)?

Was 10-year Treasury bond called Treasury Bill, Note, or Bond? What was the term ... that...

Was 10-year Treasury bond called Treasury Bill, Note, or Bond? What was the term ... that indicates the situation in which the yield of Treasury bonds sharply decreases because U.S. Treasury bonds are the safest assets? What is the meaning of finance? Is it not a gamble to earn more money using some seed money?

Subjects