In: Finance
Assume that you are considering the purchase of a 14-year, noncallable bond with an annual coupon rate of 8.4%. The bond has a face value of $1,000, and it makes semiannual interest payments. If you require an 7.2% nominal yield to maturity on this investment, what is the maximum price you should be willing to pay for the bond? To calculate the maximum price you would pay for this bond, this problem requires solving for:
1. Group of answer choices :
Payment (in dollars)
Present Value (in dollars)
Future Value (in dollars)
The Par Value (in dollars)
2. Once calculated, the annual payment must be:
Group of answer choices
Multiplied by 2
Divided by 3
Divided by 2
Multiplied by 3
3. Ravenstar Corporation's bonds make an annual coupon interest payment of 4.60%. The bonds have a par value of $1,000, a current price of $880, and mature in 16 years. What is the yield to maturity on these bonds?
The annual payment will be calculated as:
Group of answer choices
Coupon rate x current price
Current rate x current price
Coupon rate x par value
Coupon rate/par value
1.
To calculate the maximum price you would pay for this bond, this
problem requires solving for:
Present Value (in dollars)
2.
Once calculated, the annual payment must be:
Divided by 2
3.
The annual payment will be calculated as:
Coupon rate x par value