Question

In: Finance

You want to buy a $2000 corporate bond maturing in 3 years with a coupon rate...

You want to buy a $2000 corporate bond maturing in 3 years with a coupon rate of 9%. The current market rate is of 7%. Answer the following questions:
1) How much is the bond going to cost you today?
2) Will the coupon rate change if the market rate rises to 8%?
3) What will the price be of the bond if market rate is 6%?

Solutions

Expert Solution


Related Solutions

Bond T is a coupon bond with a coupon rate of 2% maturing in 3 years....
Bond T is a coupon bond with a coupon rate of 2% maturing in 3 years. The bond pays coupon annually, and has a face value of $100.15. What is the Macaulay duration of the coupon bond
You buy a 7% coupon bond maturing in 5 years. The bond has a $70 annual...
You buy a 7% coupon bond maturing in 5 years. The bond has a $70 annual coupon, $1,000 face value, and the promised annual coupon is $70. The market's required return on similar bonds is 7%. I know that the present value of the face value is $712.99. How would I calculate the present value of the coupon payments? I know it's $287.01, but what values would I put in a Texas Instruments BA II plus calculator to yield this?
find the EAY of a bond maturing in 18 years with a coupon rate of 12%...
find the EAY of a bond maturing in 18 years with a coupon rate of 12% and market price of 1347.31
Sunland, Inc., has a bond issue maturing in seven years that is paying a coupon rate...
Sunland, Inc., has a bond issue maturing in seven years that is paying a coupon rate of 8.5 percent (semiannual payments). Management wants to retire a portion of the issue by buying the securities in the open market. If it can refinance at 7.0 percent, how much will Sunland pay to buy back its current outstanding bonds? (Round answer to 2 decimal places, e.g. 15.25.) Sunland will pay $
A certain 6​% annual coupon rate convertible bond​ (maturing in 20​ years) is convertible at the​...
A certain 6​% annual coupon rate convertible bond​ (maturing in 20​ years) is convertible at the​ holder's option into 20 shares of common stock. The bond is currently trading at ​$800. The stock​ (which pays 81​¢ a share in annual​ dividends) is currently priced in the market at ​$33.18 a share. a. What is the​ bond's conversion​ price? b. What is its conversion​ ratio? c. What is the conversion value of this​ issue? What is its conversion​ parity? d. What...
Nanotech, Inc., has a bond issue maturing in seven years that is paying a coupon rate...
Nanotech, Inc., has a bond issue maturing in seven years that is paying a coupon rate of 8.46 percent (semiannual payments). Management wants to retire a portion of the issue by buying the securities in the open market. If it can refinance at 10.82 percent, how much will Nanotech pay to buy back its current outstanding bonds? (Round intermediate calculations to 4 decimal places, e.g. 1.2514 and final answer to 2 decimal places, e.g. 15.25.) Nanotech will pay $......
You want to buy a corporate bond for your portfolio. The bond is 10 year, $1,000...
You want to buy a corporate bond for your portfolio. The bond is 10 year, $1,000 par value and makes semi-annual coupon payments. The annual coupon rate is 6%. It has been four years since it was issued. Market interest rates have dropped to 4%. (10 pt.s) What is the price the bond would currently be trading at? Five years after issue the company has run into trouble and its bonds are now trading at 97. What is the yield...
Citicorp issues a bond providing a 3% coupon semiannually maturing in three years. The par value...
Citicorp issues a bond providing a 3% coupon semiannually maturing in three years. The par value of the bond is 1,000 and the yield to maturity is 3%. 1) What is the price of this bond? 2) Compute the duration and convexity of the bond. 3) Approximately compute the new price of the bond as the yield increases to 200 basis points only with the duration from 2). 4) Approximately compute the new price of the bond as the yield...
Suppose you purchase a zero coupon bond with face value $1,000, maturing in 27 years, for...
Suppose you purchase a zero coupon bond with face value $1,000, maturing in 27 years, for $693.33. What is the implicit interest, in dollars, in the first year of the bond's life?
Bond price: Nanotech Ltd has a bond issue maturing in seven years and paying a coupon...
Bond price: Nanotech Ltd has a bond issue maturing in seven years and paying a coupon rate of 11.39 percent (semiannual payments). The company wants to retire a portion of the issue by buying the securities in the open market. If it can refinance at 10.73 percent, Nanotech will pay $_______________ to buy back its current outstanding bonds?
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT