A $ 1,000 face value, 6.8 % coupon, State of California bond with 18 years to...

A $ 1,000 face value, 6.8 % coupon, State of California bond with 18 years to run until maturity is currently priced to yield investors 6.5 % compounded semi-annually until maturity. How much lower would the bond’s price have to be to make the yield to maturity 7 % compounded semi-annually?

Expert Solution

ekkarill92 answered 2 years ago

Consider a 10 year bond with face value $1,000 that pays a 6.8% coupon semi-annually and...

Consider a 10 year bond with face value $1,000 that pays a 6.8% coupon semi-annually and has a yield-to-maturity of 8.4%. What is the approximate percentage change in the price of bond if interest rates in the economy are expected to decrease by 0.60% per year? Submit your answer as a percentage and round to two decimal places. (Hint: What is the expected price of the bond before and after the change in interest rates?) To answer the question: (1)...

Suppose you purchase a zero coupon bond with a face value of $1,000, maturing in 18...

Suppose you purchase a zero coupon bond with a face value of $1,000, maturing in 18 years, for $214.70. Zero coupon bonds pay the investor the face value on the maturity date. What is the implicit interest in the first year of the bond’s life?

A $1,300 face value corporate bond with a 6.8 percent coupon (paid semiannually) has 15 years...

A $1,300 face value corporate bond with a 6.8 percent coupon (paid semiannually) has 15 years left to maturity. It has had a credit rating of BBB and a yield to maturity of 7.5 percent. The firm has recently gotten into some trouble and the rating agency is downgrading the bonds to BB. The new appropriate discount rate will be 8.8 percent. What will be the change in the bond’s price in dollars and percentage terms?

A zero coupon bond with a face value of $1,000 that matures in 8 years sells...

A zero coupon bond with a face value of $1,000 that matures in 8 years sells today for $556. What is the yield to maturity? (Use annual compounding.)

Consider a zero-coupon bond maturing in 2 years with a face value of $1,000 and a...

Consider a zero-coupon bond maturing in 2 years with a face value of $1,000 and a yield to maturity of 2%. Assume the recovery rate is 40%, and that default can only happen exactly at the end of the 2-year period. There is a credit default swap (CDS) available for this bond, and the premium is 0.8%. For both a bondholder and a CDS buyer (with notional value $1,000), compute the cash flows two years from today in the case...

Bond A is a 10% coupon bond with a face value of $1,000 and a maturity...

Bond A is a 10% coupon bond with a face value of $1,000 and a maturity of 3 years. The discount rate (required return, or interest rate) is 8% now or in the future. A. What is the bond price now, in year 1, in year 2, and in year 3 (P0,P1,P2 and P3)? B. If you buy the bond now and hold it for one year, what is the (expected) rate of return? C. If you buy...

A bond that matures in 18 years has a $1,000 par value. The annual coupon interest...

A bond that matures in 18 years has a $1,000 par value. The annual coupon interest rate is 14 percent and the market's required yield to maturity on a comparable-risk bond is 15 percent. What would be the value of this bond if it paid interest annually? What would be the value of this bond if it paid interest semiannually?

a. A 9.5 percent coupon (paid semiannually) bond, with a $1,000 face value and 20 years...

a. A 9.5 percent coupon (paid semiannually) bond, with a $1,000 face value and 20 years remaining to maturity. The bond is selling at $960. (Do not round intermediate calculations. Round your answer to 3 decimal places. (e.g., 32.161)) Yield to maturity___________ % per year b. An 10 percent coupon (paid quarterly) bond, with a $1,000 face value and 10 years remaining to maturity. The bond is selling at $902. (Do not round intermediate calculations. Round your answer to 3...

A zero-coupon bond with face value $1,000 and maturity of four years sells for $737.22. a....

A zero-coupon bond with face value $1,000 and maturity of four years sells for $737.22. a. What is its yield to maturity? (Round your answer to 2 decimal places.) b. What will the yield to maturity be if the price falls to $721?

A bond with a face value of $1,000 has 8 years until maturity, carries a coupon...

A bond with a face value of $1,000 has 8 years until maturity, carries a coupon rate of 7.0%, and sells for $1,085. a. What is the current yield on the bond? (Enter your answer as a percent rounded to 2 decimal places.) b. What is the yield to maturity if interest is paid once a year? (Do not round intermediate calculations. Enter your answer as a percent rounded to 4 decimal places.) c. What is the yield to maturity...

Question