Question
In: Finance
Bonds often pay a coupon twice a year. For the valuation of bonds that make semiannual...
Bonds often pay a coupon twice a year. For the valuation of bonds that make semiannual payments, the number of periods doubles, whereas the amount of cash flow decreases by half. Using the values of cash flows and number of periods, the valuation model is adjusted accordingly.
Assume that a $1,000,000 par value, semiannual coupon US Treasury note with four years to maturity has a coupon rate of 4%. The yield to maturity (YTM) of the bond is 7.70%. Using this information and ignoring the other costs involved, calculate the value of the Treasury note:
a) $1,049,602.92
b) $874,669.10
c) $551,041.53
d) $743,468.74
Based on your calculations and understanding of semiannual coupon bonds, complete the following statement:
When valuing a semiannual coupon bond, the time period variable(N) used to calculate the price of a bond reflects the number of periods remaining in the bond’s life.
Solutions
jeff jeffy answered 7 months agoRelated Solutions
Bonds often pay a coupon twice a year. For the valuation of bonds that make semiannual...
Bonds often pay a coupon twice a year. For the valuation of
bonds that make semiannual payments, the number of periods doubles,
whereas the amount of cash flow decreases by half. Using the values
of cash flows and number of periods, the valuation model is
adjusted accordingly.
Assume that a $1,000,000 par value, semiannual coupon U.S.
Treasury note with two years to maturity has a coupon rate of 3%.
The yield to maturity (YTM) of the bond is 11.00%. Using...
Bonds often pay a coupon twice a year. For the valuation of bonds that make semiannual...
Bonds often pay a coupon twice a year. For the valuation of
bonds that make semiannual payments, the number of periods doubles,
whereas the amount of cash flow decreases by half. Using the values
of cash flows and number of periods, the valuation model is
adjusted accordingly.
1) Assume that a $1,000,000 par value, semiannual coupon US
Treasury note with four years to maturity has a coupon rate of 4%.
The yield to maturity (YTM) of the bond is 7.70%....
1) Semiannual compounding and/or that all coupon bonds are semiannual-pay bonds; 2) Bonds are $1000 par....
1) Semiannual compounding and/or that all coupon bonds are
semiannual-pay bonds;
2) Bonds are $1000 par.
What is the Macaulay duration of a semiannual-pay 8.16 percent
coupon bond with 7 years to maturity and a yield to maturity of
7.52 percent? Answer to two decimals, carry
intermediate calcs. to four decimals.
****Please show the steps of calculation and the
inputs of financial calculator
The Ivanhoe Department of Transportation has issued 25-year bonds that make semiannual coupon payments at a...
The Ivanhoe Department of Transportation has issued 25-year
bonds that make semiannual coupon payments at a rate of 10.075
percent. The current market rate for similar securities is 11.3
percent. Assume that the face value of the bond is $1,000. Suppose
the bond were to mature in 12 years.
What will be the bond’s price if rates in the market (i)
decrease to 9.30 percent or (ii) increase to 12.3 percent?
(i) Bond's price if rate decrease to 9.30 percent...
The Blossom Department of Transportation has issued 25-year bonds that make semiannual coupon payments at a...
The Blossom Department of Transportation has issued 25-year
bonds that make semiannual coupon payments at a rate of
9.825percent. The current market rate for similar securities is
11.3 percent. Assume that the face value of the bond is
$1,000.
Excel Template
(Note: This template includes the problem statement as it
appears in your textbook. The problem assigned to you here may have
different values. When using this template, copy the problem
statement from this screen for easy reference to the...
Bonds issued in the Philippines, make a coupon payments twice ayear. So, if an ordinary...
Bonds issued in the Philippines, make a coupon payments twice a
year. So, if an ordinary bond has a coupon rate of 14%, then the
owner will get a total of P140 a year, but this P140 will come in
two payments of P70. Suppose we are examining such a bond with a
face value P1,000. The yield to maturity is quoted at
16%. Bond yields are quoted like APR’s; the quoted rate is equal to
the actual rate per period...
Doisneau 16-year bonds have an annual coupon interest of 9percent, make interest payments on a semiannual...
Doisneau 16-year bonds have an annual coupon interest of
9percent, make interest payments on a semiannual basis, and have
a$1,000par value. If the bonds are trading with a market's required
yield to maturity of 11percent, are these premium or discount
bonds? Explain your answer. What is the price of the bonds
Sandhill, Inc., has four-year bonds outstanding that pay a coupon rate of 7.50 percent and make...
Sandhill, Inc., has four-year bonds outstanding that pay a
coupon rate of 7.50 percent and make coupon payments semiannually.
If these bonds are currently selling at $918.89. What is the
effective annual yield? (Round answer to 1 decimal place, e.g.
15.2%.)
Effective annual yield: I got 8.2% but it is wrong
Oriole, Inc., has four-year bonds outstanding that pay a coupon rate of 6.20 percent and make...
Oriole, Inc., has four-year bonds outstanding that pay a coupon
rate of 6.20 percent and make coupon payments semiannually. If
these bonds are currently selling at $920.89.
What is the yield to maturity that an investor can expect to
earn on these bonds? (Round answer to 1 decimal place,
e.g. 15.2%.)
Yield to maturity
%
What is the effective annual yield? (Round answer to 1
decimal place, e.g. 15.2%.)
Effective annual yield
%
Click if you would like to Show...
Blossom, Inc., has four-year bonds outstanding that pay a coupon rate of 8.00 percent and make...
Blossom, Inc., has four-year bonds outstanding that pay a coupon
rate of 8.00 percent and make coupon payments semiannually. If
these bonds are currently selling at $911.89.
What is the yield to maturity that an investor can expect to
earn on these bonds? (Round answer to 1 decimal place, e.g.
15.2%.)
Yield to maturity %
What is the effective annual yield? (Round answer to 1 decimal
place, e.g. 15.2%.)
Effective annual yield %
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