Question
In: Finance
Assume we have a bond that has a face value of $1000 and a coupon rate...
Assume we have a bond that has a face value of $1000 and a coupon rate of 5%, paid annually.
a) If the bond price today is 91.45% and the duration (years to maturity) is 3, what must be investors' required rate of return?
b) Assume the bond was a callable bond. Would an investor expect a higher or lower price on the bond? Justify your answer.
c) Assume the bond was a convertible bond. Would an investor expect a higher or lower price on the bond? Justify your answer.
d) Given the required rate of return from part a), would investors prefer the original bond above, or a bond that has a maturity of 5 years, a price of $900, and a coupon payment of $40, paid annually?
Solutions
jeff jeffy answered 2 years agoRelated Solutions
A bond has a face value of $1000 and the coupon rate is 6%. Coupons are...
A bond has a face value of $1000 and the coupon rate is 6%.
Coupons are paid semiannually. The bond matures in six years. The
market interest rate is 7%. What is the present value of this bond?
And Suppose the price of the bond equals to the present value of
the bond. What is the current yield of this bond?
A 5-year bond with a face value of $1000 has a coupon rate of 6%, with...
A 5-year bond with a face value of $1000 has a coupon rate of
6%, with semiannual payments. What is the coupon payment for this
bond per 6-month period? A. $60 B. not enough information C.
$30
A 5-year bond with a face value of $1000 has a coupon rate of 6%, with...
A 5-year bond with a face value of $1000 has a coupon rate of
6%, with semiannual payments. What is the coupon payment for this
bond per 6-month period?
A.
not enough information
B.
$60
C.
$30
Rob decided to by a bond with a face value of 1000, coupon rate of 10%...
Rob decided to by a bond with a face value of 1000, coupon rate
of 10% which is paid out annually, with a maturity of 6 years. Rob
invests the coupon for the first year at 8 percent for a year and
sells the bond after receiving the 2nd years coupon is received. At
time equals 2, the bonds yield to maturity is 9.5 percent. If Rob
earned an annualized 14% return on this what was the purchase price
fo...
What is the price of a bond with a $1000 face value, an 9.5% coupon rate,...
What is the price of a bond with a $1000 face value, an 9.5%
coupon rate, semiannual coupons, and 7 years to maturity if it has
a yield to maturity of 13%?
answer choices:
$930.24
$428.16
$842.26
$414.10
A five-year $1000 face value bond has a 5% coupon rate and a 10% yield to...
A five-year $1000 face value bond has a 5% coupon rate and a
10% yield to maturity. It makes annual coupon payments selling for
$810.46. Please calculate this bond’s (20 points)
Macaulay duration
Modified duration
Convexity
If the interest rate rises by 100 bps, what would be the dollar
amount change in price?
You own a bond with the following features: Face value of $1000, Coupon rate...
You own a bond with the following features:
Face value of $1000,
Coupon rate of 5% (annual)
13 years to maturity.
The bond is callable after 7 years with the call price of
$1,071.
If the market interest rate is 3.51% in 7 years when the bond
can be called, if the firm calls the bond, how much will it save or
lose by calling the bond?
State your answer to the nearest penny (e.g., 84.25)
If...
You own a bond with the following features: Face value of $1000, Coupon rate...
You own a bond with the following features:
Face value of $1000,
Coupon rate of 4% (annual)
11 years to maturity.
The bond is callable after 7 years with the call price of
$1,069.
If the market interest rate is 4.23% in 7 years when the bond
can be called, if the firm calls the bond, how much will it save or
lose by calling the bond?
State your answer to the nearest penny (e.g., 84.25)
If...
If a 30 year bond with a face value of 1000 anda 5% coupon rate is...
If
a 30 year bond with a face value of 1000 anda 5% coupon rate is
selling for $947.51, which of the following could be the yield to
maturity?
Assume a one year bond with a par value of $1000 and a coupon
rate of 5%. What is the price if the current interest rate is
5%?
A bond with three years to maturity has a face value of $1000 and a coupon...
A bond with three years to maturity has a face value of $1000
and a coupon rate of 3%. It is initially bought at a yield to
maturity of 7% then sold after one year when market yields have
fallen to 3%. What is the rate of return for the first year?
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