Consider the following bond: Face value = 1000; coupon rate = 8%; maturity = 5 years;...

Consider the following bond: Face value = 1000; coupon rate = 8%; maturity = 5 years; ytm = 7%

A) What is the value of the bond today and in 2 years?

b) what are the current yield and capital gains yield for this bond this year and in two years?

c) Assuming interest rates remain the same over this bond's lifetime, what is going to happen to the value of this bond as time goes by?

Expert Solution

a and b

	Today	After 2 years
Maturity	5	3
Value of bond	$1,041.00	$1,026.24
Current yield	7.68%	7.795%
Capital gain yield	-0.68%	-1.4178%

c: as times goes by, the value of the bond will decline down to its face value.

Workings

jeff jeffy answered 1 week ago

Given the following bond: Par Value = $1000 Time to Maturity = 8 years Coupon Rate...

Given the following bond: Par Value = $1000 Time to Maturity = 8 years Coupon Rate = 6.25% Coupons are paid annually. Calculate the Duration of this bond. Please note this is calculating the duration so you do not need the discount rate or the market price

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?

Consider a bond with a $1000 face value, with a 20 year maturity and a coupon...

Consider a bond with a $1000 face value, with a 20 year maturity and a coupon rate of 8% which pays coupons with a semi-annual frequency. The 4th coupon payment will be received in 1 second. Calculate the value of the bond if the YTM is 4%, 6%, 8%, and 10% (APR with semi-annual compounding). Explain why there is a negative relation between bond price and YTM.

Given: A $1000 face-value, 20%-coupon bond with 5 years remaining to maturity, and a yield to...

Given: A $1000 face-value, 20%-coupon bond with 5 years remaining to maturity, and a yield to maturity of 10% What is the duration? _____________________. What is the percent volatility? _________________________.

Last year, you bought a bond with face value $1000, maturity 20 years, coupon rate of...

Last year, you bought a bond with face value $1000, maturity 20 years, coupon rate of 7% per year payable semi-annually and yield to maturity of 5.5% per year. Currently the bond sells for $900. How much would be your total yield if you sell this bond today? (17.84%) (15.79%) 13.71% 10.78%.

a bond with a $1000 par value, 10 years to maturity, and a coupon rate of...

a bond with a $1000 par value, 10 years to maturity, and a coupon rate of 6% paid annually is selling for $1,123.42. Its yield to maturity is: a. 3.00% b. 4.44% c. 12.34% d. 10.29%

What is yield to maturity of $1000 face-value 8% coupon bond with a selling price of...

What is yield to maturity of $1000 face-value 8% coupon bond with a selling price of $1010 that has 1 year left to maturity? Assuming no inflation, under what conditions will this coupon bond have a negative yield (think about its selling price)? What about any coupon bond with any maturity?

A bond has years to maturity, a coupon rate of 6.7% , and a face value...

A bond has years to maturity, a coupon rate of 6.7% , and a face value of $1000. The yield to maturity is 14%. Assume annual compounding. What is the current price of the bond, the coupon yield, and the capital gain yield? Also, what will be the price of the bond when it has 4 years to maturity (one year from today) and what is the percentage increase/decrease in price during the year? (Note: use negative signs to indicate...

Bond A has the following features: Face value = $1,000, Coupon Rate = 5%, Maturity...

Bond A has the following features: Face value = $1,000, Coupon Rate = 5%, Maturity = 9 years, Yearly coupons The market interest rate is 6.15% What is the current yield for bond A from today to year 1? Calculate your answer to 2 decimal places (e.g., 5.23)

Bond Features Maturity (years) 5 Face Value = $1,000 Coupon Rate = 7.00% Coupon dates (Annual)...

Bond Features Maturity (years) 5 Face Value = $1,000 Coupon Rate = 7.00% Coupon dates (Annual) Market interest rate today 7.00% Time to call (years) 3 Price if Called $1,070.00 Market interest rate in Year 3 5.00% The above bond is callable in 3 years. When the bond is issued today, interest rates are 7.00% . In 3 years, the market interest rate is 5.00% . Should the firm call back the bonds in year 3 and if so, how...

Question