Question

In: Finance

A 6% coupon, 24-year annual bond has a yield to maturity of 4.4%. Assuming the par...

A 6% coupon, 24-year annual bond has a yield to maturity of 4.4%. Assuming the par value is $1,000 and the YTM does not change over the next year, what will the price of the bond be today? What will the bond price be in one year? What is the capital gains yield for this bond?

Expert Solution

what will the price of the bond be today?

Bond Valuation: The value of bond is the present value of the expected cashflows from the bond,discounted at Yield to Maturity(YTM).

Prima facie, the bond will trade at Premium as YTM<coupon rate

Year	Cash flow	PVAF/[email protected]%	*Present Value (CashflowPVAF/PVF)**
1-24	60	14.6412*	878.47
24	1000	0.3558**	355.79

Current Market Price of Bonds P0 = Cashflow*PVAF/PVF

= 878.47+355.79

= $1234.26

*PVAF = (1-(1+r)^-n)/r

**PVF = 1 / (1+r)^n

What will the bond price be in one year?

Year	Cash flow	PVAF/[email protected]%	*Present Value (CashflowPVAF/PVF)**
1-23	60	14.2855	857.13
23	1000	0.3714	371.44

Current Market Price of Bonds P1 = Cashflow*PVAF/PVF

= 857.13+371.44

= $1228.57

What is the capital gains yield for this bond?

Capital Gain / -loss Yield = (P1-P0)/P0

= (1228.57-1234.26)/1234.26

= -5.69/1234.26

= -0.46%

jeff jeffy answered 1 year ago

A 8.3% coupon, 8-year annual bond has a yield to maturity of 6.3%. Assuming the par...

A 8.3% coupon, 8-year annual bond has a yield to maturity of 6.3%. Assuming the par value is $1,000 and the YTM does not change over the next year, what will the price of the bond be today? What will the bond price be in one year to nearest cent? What is the capital gains yield for this bond? (4 decimals)

Q6) A 04.90% annual coupon, 8-year bond has a yield to maturity of 09.80%. Assuming the...

Q6) A 04.90% annual coupon, 8-year bond has a yield to maturity of 09.80%. Assuming the par value is $1,000 and the YTM is expected not to change over the next year: a) what should the price of the bond be today? (1 point) b) What is bond price expected to be in one year? (1 point) c) What is the expected Capital Gains Yield for this bond? (1 point) d) What is the expected Current Yield...

What is the yield to maturity on the following: 10 year bond, 7.5% annual coupon, par...

What is the yield to maturity on the following: 10 year bond, 7.5% annual coupon, par value of $1,000, selling for $813.12 a. 9.88% b. 10.25% c. 10.51% d. 10.62% e. 11.07%

4. A six-year bond with face value 100 and 4% coupon has a yield-to-maturity of 4.4%....

4. A six-year bond with face value 100 and 4% coupon has a yield-to-maturity of 4.4%. You have a 1-year horizon and expect the bond’s y-t-m to increase to 5% next year. What is your expected ROR? (Please show work)

. An investor buys a 10 year, 8% annual coupon bond at par (so the yield-to-maturity...

. An investor buys a 10 year, 8% annual coupon bond at par (so the yield-to-maturity must be 8%), and sells it after three years (just after the coupon is recieved). Interest rates rise immediately after the purchase, and the bond’s yield-to-maturity jumps to 10% and remains there for the rest of the three year period. Assume coupons are reinvested at the new yield-to-maturity. Show the components of the investor’s “total return,” or portfolio value at the end of the...

What is the yield to maturity on a 10-year, 9% annual coupon, $1,000 par value bond...

What is the yield to maturity on a 10-year, 9% annual coupon, $1,000 par value bond that sells for $887.00? That sells for $1,134.20? What does the fact that a bond sells at a discount or at a premium tell you about the relationship between and the bond’s coupon rate? What are the total return, the current yield, and the capital gains yield for the discount bond? (Assume the bond is held to maturity and the company does not default...

A $1,000 par value bond, has an annual coupon rate of 6 percent, an annual yield...

A $1,000 par value bond, has an annual coupon rate of 6 percent, an annual yield to maturity of 7.5 percent, and 10 years until maturity. Assuming semi-annual coupon payments: d. If the bond were selling for $929, what would the effective yield-to-maturity if you reinvest coupon payments at 9 percent? ***please show the work or what is entered in calculator***

A premium annual-pay bond pays a $77 coupon, has a yield to maturity of 6%, and...

A premium annual-pay bond pays a $77 coupon, has a yield to maturity of 6%, and is priced at $1,198.7. How many years till the bond matures? Answer in years to at least two decimal places.

A 10-year bond has a 10 percent annual coupon and a yield to maturity of...

A 10-year bond has a 10 percent annual coupon and a yield to maturity of 12 percent. The bond can be called in 5 years at a call price of $1,050 and the bond’s face value is $1,000. Which of the following statements is most correct? Please explain why. a. The bond’s current yield is greater than 10 percent. b. The bond’s yield to call is less than 12 percent. c. The bond is selling at...

What is the coupon rate of an annual coupon bond that has a yield to maturity...

What is the coupon rate of an annual coupon bond that has a yield to maturity of 5.5%, a current price of $949.81, a par value of $1,000 and matures in 15 years? 6.33% 4.70% 3.07% 5.00%