Question

In: Finance

Apple just issued 6.2% coupon 20 year bonds that have a YTM of 7% and pay...

Apple just issued 6.2% coupon 20 year bonds that have a YTM of 7% and pay semiannually. What is the current price?

Solutions

Expert Solution

Face/Par value 1000
Coupon rate 6.20%
Annual coupon 62
Semiannual coupon 31
Time to maturity 20 years
Present value = Future value/[(1+(r/m))^mt]
where C is the present value
r is the interest rate that is .07
mt is the time period
m is the compounding period that is 2
price of bond = sum of present values of future cash flows
r 0.035
mt 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40
future cash flow 31 31 31 31 31 31 31 31 31 31 31 31 31 31 31 31 31 31 31 31 31 31 31 31 31 31 31 31 31 31 31 31 31 31 31 31 31 31 31 1031
present value 29.95 28.94 27.96 27.01 26.10 25.22 24.37 23.54 22.75 21.98 21.23 20.52 19.82 19.15 18.50 17.88 17.27 16.69 16.12 15.58 15.05 14.54 14.05 13.58 13.12 12.67 12.25 11.83 11.43 11.04 10.67 10.31 9.96 9.62 9.30 8.98 8.68 8.39 8.10 260.40
sum of present values 914.58
The current price of the bond is $914.58.

jeff jeffy answered 1 year ago
Next > < Previous

Related Solutions

1. Assume Apple issued bonds with a 20 year maturity at a coupon rate of 8.4...
1. Assume Apple issued bonds with a 20 year maturity at a coupon rate of 8.4 percent. The bonds make semiannual payments, and the YTM on these bonds is 7.5 percent. What is the semiannual coupon payment? A.$37.50 B.$42 C.$84 D.$75 2. Is the bond trading at par, discount, or premium? A.Par B. Discount C.Premium D.All the above 3. What is the yield that should be used to calculate the bond price? A. 7.5% B.4.35% C. 8.4% D.4.8% 4. What...
The yield to maturity (YTM) on 1-year zero-coupon bonds is 7% and the YTM on 2-year...
The yield to maturity (YTM) on 1-year zero-coupon bonds is 7% and the YTM on 2-year zeros is 8%. The yield to maturity on 2-year-maturity coupon bonds with coupon rates of 10% (paid annually) is 7.5%. a. What arbitrage opportunity is available for an investment banking firm? The arbitrage strategy is to buy zeros with face values of $  and $  , and respective maturities of one year and two years. b. What is the profit on the activity? (Do not round...
The yield to maturity (YTM) on 1-year zero-coupon bonds is 7% and the YTM on 2-year...
The yield to maturity (YTM) on 1-year zero-coupon bonds is 7% and the YTM on 2-year zeros is 8%. The yield to maturity on 2-year-maturity coupon bonds with coupon rates of 11% (paid annually) is 7.7%. a. What arbitrage opportunity is available for an investment banking firm? The arbitrage strategy is to buy zeros with face values of $____ and $____ , and respective maturities of one year and two years. b. What is the profit on the activity?
If you have a four year bond with a coupon of 7% and a YTM of...
If you have a four year bond with a coupon of 7% and a YTM of 5% verify that investing in this bond for the period of the bond’s Macauly duration results in no change to the overall future value of your cash flows if interest rates fall by 1%. Show all calculations.
Suppose the YTM is 5% for a 20-year $1000 bond with a 7% coupon rate and...
Suppose the YTM is 5% for a 20-year $1000 bond with a 7% coupon rate and annual coupon payments. Its bond price is $____. Instruction: Type ONLY your numerical answer in the unit of dollars, NO $ sign, NO comma, and round to one decimal place. E.g., if your answer is $7,001.56, should type ONLY the number 7001.6, NEITHER 7,001.6, $7001.6, $7,001.6, NOR 7002. Otherwise, Blackboard will treat it as a wrong answer.
Bettanin Corporation recently issued 20-year bonds. The bonds have a coupon rate of 8 percent and...
Bettanin Corporation recently issued 20-year bonds. The bonds have a coupon rate of 8 percent and pay interest semiannually. Also, the bonds are callable in 6 years at a call price equal to 115 percent of par value of $1,000. The par value of the bonds is $1,000. If the yield to maturity is 7 percent, what is the yield to call?
The yield to maturity on 1-year zero-coupon bonds is currently 7%; the YTM on 2-year zeros...
The yield to maturity on 1-year zero-coupon bonds is currently 7%; the YTM on 2-year zeros is 8%. The Treasury plans to issue a 2-year maturity coupon bond, paying coupons once per year with a coupon rate of 9%. The face value of the bond is $100. a. At what price will the bond sell? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Price b. What will the yield to maturity on the bond be? (Do...
The yield to maturity on one-year zero-coupon bonds is currently 7 percent; the YTM on two-year...
The yield to maturity on one-year zero-coupon bonds is currently 7 percent; the YTM on two-year zeroes is 8 percent. The federal government plans to issue a two-year-maturity coupon bond, paying coupons once per year with a coupon rate of 9 percent. The face value of the bond is $100. At what price will the bond sell? What will be the yield to maturity on the bond? If the expectations theory of the yield curve is correct, what is the...
The yield to maturity (YTM) on 1-year zero-coupon bonds is 5% and the YTM on 2-year...
The yield to maturity (YTM) on 1-year zero-coupon bonds is 5% and the YTM on 2-year zeros is 6%. The yield to maturity on 2-year-maturity coupon bonds with coupon rates of 15% (paid annually) is 5.2%. a. What arbitrage opportunity is available for an investment banking firm? b. What is the profit on the activity? (Do not round intermediate calculations. Round your answer to 2 decimal places.)
8.30     Rachette Corp. issued 20-year bonds five years ago. These bonds, which pay semiannual coupons, have...
8.30     Rachette Corp. issued 20-year bonds five years ago. These bonds, which pay semiannual coupons, have a coupon rate of 9.735 percent and a yield to maturity of 7.95 percent. a.   Compute the bond’s current price. b.   If the bonds can be called after five more years at a premium of 13.5 percent over par value, what is the investor’s realized yield? c.   If you bought the bond today, what is your expected rate of return? Explain.
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT