Five $1,000 bonds having a bond rate of 8% per year payable quarterly are purchased for...

Five $1,000 bonds having a bond rate of 8% per year payable quarterly are purchased for $4,940 and kept for 6 years, at which time they are sold. Determine the selling price that yields a 6% effective annual return on the investment.

Solve without excel. Please.

Solutions

Expert Solution

jeff jeffy answered 2 years ago

Next > < Previous

Related Solutions

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...

You purchased a bond with a par value of $1,000 and a coupon rate of 8...

You purchased a bond with a par value of $1,000 and a coupon rate of 8 percent at a price of $1,100 at the beginning of the year. The price of the bond was $1,000 at the end of the year. Which of the following development(s) could explain this change? 1. The default risk of the bond increased. 2. The YTM of bonds of similar credit risk increased. 3. The YTM of bonds of similar credit risk decreased. 4. The...

Two years ago, MTR issued $1,000 ten-year bonds that carry a coupon rate of 8% payable...

Two years ago, MTR issued $1,000 ten-year bonds that carry a coupon rate of 8% payable semi-annually. a.) If you require an effective annual rate of return of 12%, how much are you willing to pay for the bond today? b.) What will be the bond price if the yield to maturity falls to 6% in one year?. C.) From the answer computed in above part (b), identify, with brief explanation (within 30 words), whether the bond is issued at...

You consider purchasing a 10-year $1,000-par US Government Bond with quarterly coupon rate of 8%. When...

You consider purchasing a 10-year $1,000-par US Government Bond with quarterly coupon rate of 8%. When you check in the Wall Street Journal, the bond is listed for $1,050. What is the yield to maturity of the bond? Show all work as demonstrated in the live class, and as described in the instructions previously sent to you and posted on Canvas. END or BGN MODE ? P/Y = N= I/Y= PV= PMT= FV= CPT ? ->

Last year, Joan purchased a $1,000 face value corporate bond with an 8% annual coupon rate...

Last year, Joan purchased a $1,000 face value corporate bond with an 8% annual coupon rate and a 25-year maturity. At the time of the purchase, it had an expected yield to maturity of 9.62%. If Joan sold the bond today for $1,053.36, what rate of return would she have earned for the past year? Round your answer to two decimal places.

Last year Janet purchased a $1,000 face value corporate bond with an 8% annual coupon rate...

Last year Janet purchased a $1,000 face value corporate bond with an 8% annual coupon rate and a 30-year maturity. At the time of the purchase, it had an expected yield to maturity of 12.56%. If Janet sold the bond today for $927.06, what rate of return would she have earned for the past year? Do not round intermediate calculations. Round your answer to two decimal places.

An investor purchased the following five bonds. Each bond had a par value of $1,000 and...

An investor purchased the following five bonds. Each bond had a par value of $1,000 and a 8% yield to maturity on the purchase day. Immediately after the investor purchased them, interest rates fell, and each then had a new YTM of 7%. What is the percentage change in price for each bond after the decline in interest rates? Fill in the following table. Enter all amounts as positive numbers. Do not round intermediate calculations. Round your monetary answers to...

An investor purchased the following five bonds. Each bond had a par value of $1,000 and...

An investor purchased the following five bonds. Each bond had a par value of $1,000 and a 9% yield to maturity on the purchase day. Immediately after the investor purchased them, interest rates fell, and each then had a new YTM of 5%. What is the percentage change in price for each bond after the decline in interest rates? Fill in the following table. Enter all amounts as positive numbers. Do not round intermediate calculations. Round your monetary answers to...

An investor purchased the following five bonds. Each bond had a par value of $1,000 and...

An investor purchased the following five bonds. Each bond had a par value of $1,000 and an 8% yield to maturity on the purchase day. Immediately after the investor purchased them, interest rates fell, and each then had a new YTM of 6%. What is the percentage change in price for each bond after the decline in interest rates? Fill in the following table. Enter all amounts as positive numbers. Do not round intermediate calculations. Round your monetary answers to...

An investor purchased the following five bonds. Each bond had a par value of $1,000 and...

An investor purchased the following five bonds. Each bond had a par value of $1,000 and a 11% yield to maturity on the purchase day. Immediately after the investor purchased them, interest rates fell, and each then had a new YTM of 5%. What is the percentage change in price for each bond after the decline in interest rates? Fill in the following table. Enter all amounts as positive numbers. Do not round intermediate calculations. Round your monetary answers to...

Subjects