Question
In: Finance
Harrimon Industries bonds have 4 years left to maturity. Interest is paid annually, and the bonds...
Harrimon Industries bonds have 4 years left to maturity. Interest is paid annually, and the bonds have a $1,000 par value and a coupon rate of 10%.
A. What is the yield to maturity at a current market price of
- $908? Round your answer to two decimal places. ___%
- $1,115? Round your answer to two decimal places. ___%
B. Would you pay $908 for each bond if you thought that a "fair" market interest rate for such bonds was 12%—that is, if rd = 12%?
- You would buy the bond as long as the yield to maturity at this price is less than your required rate of return.
- You would buy the bond as long as the yield to maturity at this price equals your required rate of return.
- You would not buy the bond as long as the yield to maturity at this price is greater than your required rate of return.
- You would not buy the bond as long as the yield to maturity at this price is less than the coupon rate on the bond.
- You would buy the bond as long as the yield to maturity at this price is greater than your required rate of return.
C. Madsen Motors's bonds have 11 years remaining to maturity. Interest is paid annually, they have a $1,000 par value, the coupon interest rate is 11%, and the yield to maturity is 13%. What is the bond's current market price? Round your answer to the nearest cent. $___
Solutions
Expert Solution
Face Value of Bond = $1000
Annual Coupon Payment = $1000*10% = $100
No of coupon Payments = 4 years
a), calculating the Yield to Maturity(YTM) of Bond if Price is $908 using the Excel "RATE" function:-
So, YTM is 13.10%
b), calculating the Yield to Maturity(YTM) of Bond if Price is $1,115 using the Excel "RATE" function:-
SO, YTM is 6.63%
c). Yes, you should buy the Bond as at this Price, as at this Price Bond has Yield to maturity greater than Required rate of return.
Option V
C). Face Value of Bond = $1000
Annual Coupon Payment = $1000*11% = $110
No of coupon Payments = 11 years
Yield To Maturity = 13%
Calculating the Price of Bond using the Excel "PV" function:-
So, the Price of Bond is $886.26
If you need any clarification, you can ask in comments.
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jeff jeffy answered 2 years agoRelated Solutions
Harrimon Industries bonds have 4 years left to maturity. Interest is paid annually, and the bonds...
Harrimon Industries bonds have 4 years left to maturity.
Interest is paid annually, and the bonds have a $1,000 par value
and a coupon rate of 9%.
a. What is the yield to maturity at a current market price
of?
1. $846? Round your answer to two decimal places. ___%
2. $1,102? Round your answer to two decimal places. ___%
b. Would you pay $846 for each bond if you thought that a "fair"
market interest rate for such bonds...
Harrimon Industries bonds have 4 years left to maturity. Interest is paid annually, and the bonds...
Harrimon Industries bonds have 4 years left to maturity.
Interest is paid annually, and the bonds have a $1,000 par value
and a coupon rate of 9%.
What is the yield to maturity at a current market price
of
$829? Round your answer to two decimal places.
%
$1,108? Round your answer to two decimal places.
%
Would you pay $829 for each bond if you thought that a "fair"
market interest rate for such bonds was 14%-that is, if...
Harrimon Industries bonds have 4 years left to maturity. Interest is paid annually, and the bonds...
Harrimon Industries bonds have 4 years left to maturity.
Interest is paid annually, and the bonds have a $1,000 par value
and a coupon rate of 10%.
A. What is the yield to maturity at a current market price
of
$873? Round your answer to two decimal places.
$1,133? Round your answer to two decimal places.
B. Would you pay $873 for each bond if you thought that a "fair"
market interest rate for such bonds was 13%—that is, if...
Harrimon Industries bonds have 4 years left to maturity. Interest is paid annually, and the bonds...
Harrimon Industries bonds have 4 years left to maturity.
Interest is paid annually, and the bonds have a $1,000 par value
and a coupon rate of 9%.
What is the yield to maturity at a current market price
of
$853? Round your answer to two decimal places.
%
$1,108? Round your answer to two decimal places.
%
Would you pay $853 for each bond if you thought that a "fair"
market interest rate for such bonds was 13%-that is, if...
Harrimon Industries bonds have 4 years left to maturity. Interest is paid annually, and the bonds...
Harrimon Industries bonds have 4 years left to maturity.
Interest is paid annually, and the bonds have a $1,000 par value
and a coupon rate of 9%.
A) What is the yield to maturity at a current market price
of
$830? Round your answer to two decimal places.
_____%
$1,120? Round your answer to two decimal places.
_____%
B) Would you pay $830 for each bond if you thought that a "fair"
market interest rate for such bonds was 14%-that...
Harrimon Industries bonds have 4 years left to maturity. Interest is paid annually, and the bonds...
Harrimon Industries bonds have 4 years left to maturity.
Interest is paid annually, and the bonds have a $1,000 par value
and a coupon rate of 8%.
What is the yield to maturity at a current market price
of
$812? Round your answer to two decimal places.
%
$1,042? Round your answer to two decimal places.
%
Would you pay $812 for each bond if you thought that a "fair"
market interest rate for such bonds was 14%-that is, if...
Harrimon Industries bonds have 4 years left to maturity. Interest is paid annually, and the bonds...
Harrimon Industries bonds have 4 years left to maturity.
Interest is paid annually, and the bonds have a $1,000 par value
and a coupon rate of 8%.
A)What is the yield to maturity at a current market price
of:
1) $808? Round your answer to two decimal places.
_____%
2) $1,065? Round your answer to two decimal places.
_____%
B) Would you pay $808 for each bond if you thought that a "fair"
market interest rate for such bonds was...
YIELD TO MATURITY Harrimon Industries bonds have 4 years left to maturity. Interest is paid annually,...
YIELD TO MATURITY
Harrimon Industries bonds have 4 years left to maturity.
Interest is paid annually, and the bonds have a $1,000 par value
and a coupon rate of 8%.
What is the yield to maturity at a current market price
of
$812? Round your answer to two decimal places.
%
$1,066? Round your answer to two decimal places.
%
Would you pay $812 for each bond if you thought that a "fair"
market interest rate for such...
A. Harrimon Industries bonds have 5 years left to maturity. Interest is paid annually, and the...
A. Harrimon Industries bonds have 5 years left to maturity.
Interest is paid annually, and the bonds have a $1,000 par value
and a coupon rate of 9%. What is the yield to maturity at a current
market price of $816? Round your answer to two decimal places. %
$1,151? Round your answer to two decimal places. % Would you pay
$816 for each bond if you thought that a "fair" market interest
rate for such bonds was 13%—that is,...
Harrimon Industries bonds have 5 years left to maturity. Interest is paid annually, and the bonds...
Harrimon Industries bonds have 5 years left to maturity.
Interest is paid annually, and the bonds have a $1,000 par value
and a coupon rate of 9%.
What is the yield to maturity at a current market price of
$822? Round your answer to two decimal places.
%
$1,111? Round your answer to two decimal places.
%
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