Question

In: Finance

a. A coupon payment bond has a face value of $100 and sells at $94. The...

a. A coupon payment bond has a face value of $100 and sells at $94. The bond has a coupon rate of 7.5% and pays semi-annual coupons. The bond has a maturity of 30 years. What is the YTM?

b. What is the YTM if the same bond in a sells at $101?

c. What is the general relationship between bond price and market interest rate? (i.e. what does discount bond imply about market interest rate and coupon rate? What does premium bond imply about market interest rate and coupon rate?)

Solutions

Expert Solution

a)

Hence, Bond yield to maturity is 8.04% (4.02%*2)

b)

Hence, Bond yield to maturity is 7.42% (3.71%*2)

c)

Bond prices and Market interest rates has inverse relationship.

Please rate Thumbs up

jeff jeffy answered 20 hours ago
Next > < Previous

Related Solutions

a. A coupon payment bond has a face value of $100 and sells at $94. The...
a. A coupon payment bond has a face value of $100 and sells at $94. The bond has a coupon rate of 7.5% and pays semi-annual coupons. The bond has a maturity of 30 years. What is the YTM? b. What is the YTM if the same bond in a sells at $101? c. What is the general relationship between bond price and market interest rate? (i.e. what does discount bond imply about market interest rate and coupon rate? What...
A bond has a face value of $1,000, coupon of 5% (the first payment is in...
A bond has a face value of $1,000, coupon of 5% (the first payment is in a year), and maturity in two tears. The bond’s price today is $963.84. What is the bond’s yield to maturity?
A bond has a 6% coupon with a face value of 100. Calculate its price for...
A bond has a 6% coupon with a face value of 100. Calculate its price for a yield-to-maturity of 5%, for each of the following maturities: a) 10 years b) 5 years c) 0 years Use these results to answer the following questions: Suppose the bond is sold today with ten years to maturity at a y-t-m of 5%. Assuming its y-t-m is unchanged, what would its price be five years from today? What about five years after that?
For a ten-year 20% coupon bond with a face value of $10,000, the annual coupon payment...
For a ten-year 20% coupon bond with a face value of $10,000, the annual coupon payment is $100 $200 $1,000 $2,000
Suppose that a 1-year zero-coupon bond with face value $100 currently sells at $86.85, while a...
Suppose that a 1-year zero-coupon bond with face value $100 currently sells at $86.85, while a 2-year zero sells at $78.61. You are considering the purchase of a 2-year-maturity bond making annual coupon payments. The face value of the bond is $100, and the coupon rate is 10.5% per year. a. What is the yield to maturity of the 2-year zero?(Do not round intermediate calculations. Round your answers to 3 decimal places.) b. What is the yield to maturity of...
Suppose that a 1-year zero-coupon bond with face value $100 currently sells at $95.43, while a...
Suppose that a 1-year zero-coupon bond with face value $100 currently sells at $95.43, while a 2-year zero sells at $77.31. You are considering the purchase of a 2-year-maturity bond making annual coupon payments. The face value of the bond is $100, and the coupon rate is 12.5% per year. a. What is the yield to maturity of the 2-year zero?(Do not round intermediate calculations. Round your answers to 3 decimal places.) b. What is the yield to maturity of...
Suppose that a 1-year zero-coupon bond with face value $100 currently sells at $91.89, while a...
Suppose that a 1-year zero-coupon bond with face value $100 currently sells at $91.89, while a 2-year zero sells at $83.37. You are considering the purchase of a 2-year-maturity bond making annual coupon payments. The face value of the bond is $100, and the coupon rate is 7% per year. a. What is the yield to maturity of the 2-year zero?(Do not round intermediate calculations. Round your answers to 3 decimal places.) b. What is the yield to maturity of...
A bond has a 10 percent coupon rate and a $100 face value. Interest is paid...
A bond has a 10 percent coupon rate and a $100 face value. Interest is paid semi-annually and the bond has 20 years to maturity. If investors require a 12 percent pa yield, what is the bond's value? How can I solve this question. Can you please explain the formula for bond's value Thank you
Consider a bond with market value $92.37 (face value = $100) and a coupon of $5.059...
Consider a bond with market value $92.37 (face value = $100) and a coupon of $5.059 dollars paid every six months (Semi-annually - December and June). The time to maturity is 10 semiannual periods. Assume today is January 1st, 2015. Therefore, the face value of the bond will be repaid on December 2019. Upload your spreadsheet on the course website (you might want to use the spreadsheet “11 Bond Yield and Duration Example” that we analyzed in class as a...
A 20-year, $1,000 par value bond has a 6.4% annual payment coupon. The bond currently sells...
A 20-year, $1,000 par value bond has a 6.4% annual payment coupon. The bond currently sells for $1,080. If the yield to maturity remains at its current rate, what will the price be 4 years from now? A 7 percent corporate bond that pays interest semi-annually was issued last year. Which two of the following most likely apply to this bond today if the current yield-to-maturity is 6 percent? I. a structure as an interest-only loan II. a current yield...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT