Let's say a Microsoft $1,000 bond has a coupon interest rate of 4.00% and a maturity...

Let's say a Microsoft $1,000 bond has a coupon interest rate of 4.00% and a maturity date 10 years from now, 2030.

a) Compute the Present Value of the interest payments to be received over the next 10 years.
b) Compute the Present Value of the above bond, with a par value of $1,000 and which matures in 10 years.

c) What is the total amount of the Present Value of the interest payments and the Present Value of the face amount of the bond?
d) An investor buys a $1000 bond for a price below par ($920) and the coupon interest rate is 4.00%. What is the current yield of this bond?

Solutions

Expert Solution

jeff jeffy answered 1 year ago

Next > < Previous

Related Solutions

Bond maturity 4 Years initial interest rate = 4.00% Coupon Rate 5.00% Annual Coupon Face Value...

Bond maturity 4 Years initial interest rate = 4.00% Coupon Rate 5.00% Annual Coupon Face Value $1,000.00 Dollar Coupons $50.00 Given the information in the table, what is the reinvestment effect in year 4 if the interest rate changes from 4.00% to 6.00% ?

An 8% coupon, 30-year maturity bond has a par value of $1,000. Suppose the interest rate...

An 8% coupon, 30-year maturity bond has a par value of $1,000. Suppose the interest rate is 6% annually. What is the bond value if it pays annual coupon payments? What is the bond value if it pays semi-annual coupon payments?

A bond pays annual interest. Its coupon rate is 8.3%. Its value at maturity is $1,000....

A bond pays annual interest. Its coupon rate is 8.3%. Its value at maturity is $1,000. It matures in 4 years. Its yield to maturity is currently 5.3%. The modified duration of this bond is ______ years.

A bond pays annual interest. Its coupon rate is 3%. Its value at maturity is $1,000....

A bond pays annual interest. Its coupon rate is 3%. Its value at maturity is $1,000. It matures in 4 years. Its yield to maturity is currently 9%. The duration of this bond is ________ years. A) 3.34 B) 3.22 C) 3.81 D) 4.54

Bond Features Maturity (years) = 6 Face Value = $1,000 Starting Interest Rate 3.83% Coupon Rate...

Bond Features Maturity (years) = 6 Face Value = $1,000 Starting Interest Rate 3.83% Coupon Rate = 4% Coupon dates (Annual) If interest rates change from 3.83% to 6.63% immediately after you buy the bond today (and stay at the new interest rate), what is the price effect in year 4 ? State your answer to the nearest penny (e.g., 48.45) If there is a loss, state your answer with a negative sign (e.g., -52.30)

Bond Features Maturity (years) = 7 Face Value = $1,000 Starting Interest Rate 4.78% Coupon Rate...

Bond Features Maturity (years) = 7 Face Value = $1,000 Starting Interest Rate 4.78% Coupon Rate = 4% Coupon dates (Annual) If interest rates change from 4.78% to 5.02% immediately after you buy the bond today (and stay at the new interest rate), what is the price effect in year 5 ? State your answer to the nearest penny (e.g., 48.45) If there is a loss, state your answer with a negative sign (e.g., -52.30)

Bond Features Maturity (years) = 6 Face Value = $1,000 Starting Interest Rate 3.28% Coupon Rate...

Bond Features Maturity (years) = 6 Face Value = $1,000 Starting Interest Rate 3.28% Coupon Rate = 5% Coupon dates (Annual) If interest rates change from 3.28% to 5.61% immediately after you buy the bond today (and stay at the new interest rate), what is the price effect in year 4 ? State your answer to the nearest penny (e.g., 48.45) If there is a loss, state your answer with a negative sign (e.g., -52.30)

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)

A $1,000 bond with a coupon rate of 5.8% paid semiannually has two years to maturity...

A $1,000 bond with a coupon rate of 5.8% paid semiannually has two years to maturity and a yield to maturity of 9%. If interest rates rise and the yield to maturity increases to 9.3%, what will happen to the price of the bond? A. fall by $6.19 B. fall by $5.16 C. rise by $5.16 D. The price of the bond will not change.

A bond has $1,000 face value, coupon rate of 3.5%, and yield to maturity (YTM) of...

A bond has $1,000 face value, coupon rate of 3.5%, and yield to maturity (YTM) of 3.7%. It will mature in 17 years and coupons are paid annually. What is this bond’s current yield?

Subjects