Question

In: Finance

You purchased a $1,000 bond with a 4.6% semi-annual coupon and 15 years to maturity six...

You purchased a $1,000 bond with a 4.6% semi-annual coupon and 15 years to maturity six years ago at a price of $865. If the yield has remained constant, what should be the price of the bond today? A. $959.46 B. $601.31 C. $905.32 D. $900.24

Three years ago you purchased a $1,000 par 12-year bond with a 3.5% semi-annual coupon at a price of $875. If the current price is $965, what is the yield to maturity of the bond today?

A. 4.89% B. 3.97% C. 3.17% D. 5.26%

Expert Solution

QUESTION 1 : The correct option is C. 905.32

Using Excel

Formula sheet

Usinf financial calculator :

Compute YTM first using the the price given.

PV = -865

PMT = 23 (Because bond pays semiannual payments i.e. coupon payments = 4.6%/2*1000 = 23)

FV = 1000 ( this will be received as face value after 15 years)

N = 30 (number of payments, 15*2 = 30)

Press CPT and then press I/Y. You will get value eqaul to 2.9877%

This value is semi annual rate. We represent YTM as annual rate. Therefore multiply this by 2 and you will get YTM = 5.97%

Let the values be as it is and insert 2.9877 as I/Y. ( because YTM is also divided by two for semi annual bonds)

Enter the value of N = 18 for 9 years. Press CPT and PV. You will get answer eqaul to $905.32

QUESTION 2 : The correcti option is 3.97%

Formula sheet

If you have any doubt, you can ask me in the comment section.

jeff jeffy answered 1 year ago

You just purchased a $1,000 par bond with a 6% semi-annual coupon and 15 years to...

You just purchased a $1,000 par bond with a 6% semi-annual coupon and 15 years to maturity at par. You are hoping that interest rates fall and that you will be able to sell the bond in seven years at a price $1,200. What will the yield to maturity of the bond have to be to get the price you want in seven years? A. 3.15% B. 4.19% C. 4.55% D. 1.57%

A bond has a $1,000 par value, 7 years to maturity, and a 12% semi-annual coupon...

A bond has a $1,000 par value, 7 years to maturity, and a 12% semi-annual coupon and sells for $947. What is its yield to maturity (YTM)?

What is the yield-to-maturity of a $1,000, 7% semi-annual coupon bond that matures in 20 years...

What is the yield-to-maturity of a $1,000, 7% semi-annual coupon bond that matures in 20 years and currently sells for $990? 7.7% 7.1% 3.55% 14.15%

For a semi-annual coupon bond with 3 years to maturity, an annual coupon of 8% (paid...

For a semi-annual coupon bond with 3 years to maturity, an annual coupon of 8% (paid 4% each six-month period), and a current yield to maturity of 4.5%, What is the Macauley duration of this bond? What is the modified duration of this bond? An investor owns $100M (market value or price NOT face or par) of these bonds, what is the Dollar Duration of this position? What is the price elasticity of this bond for a 1bp increase in...

A bond has a $1,000 par value, 15 years to maturity, and an 8% annual coupon...

A bond has a $1,000 par value, 15 years to maturity, and an 8% annual coupon and sells for $1,080. What is its yield to maturity (YTM)? Round your answer to two decimal places. % Assume that the yield to maturity remains constant for the next three years. What will the price be 3 years from today? Do not round intermediate calculations. Round your answer to the nearest cent. $

You purchased an annual interest coupon bond one year ago with six years remaining to maturity...

You purchased an annual interest coupon bond one year ago with six years remaining to maturity at the time of purchase. The coupon interest rate is 10% and the par value is $1,000. At the time you purchased the bond, the yield to maturity was 8%. If you sold the bond after receiving the first interest payment and the bond's yield to maturity had changed to 7% at the time of sale, your annual total rate of return on holding...

Three years ago you purchased a $1,000 par 12-year bond with a 3.5% semi-annual coupon at...

Three years ago you purchased a $1,000 par 12-year bond with a 3.5% semi-annual coupon at a price of $875. If the current price is $965, what was the yield to maturity of the bond when it was purchased? A. 4.89% B. 3.97% C. 3.87% D. 5.26% You purchased a $1,000 bond with a 4.6% semi-annual coupon and 15 years to maturity four years ago at a price of $855. If the yield has remained constant, what should be the...

An investor buys 6% semi-annual coupon paying bond with six years to maturity and $1000 par...

An investor buys 6% semi-annual coupon paying bond with six years to maturity and $1000 par value at $906.15.The bond has a YTM of 8%. For all the calculations ,keep four digits after the decimal place b)Calculate the bond's modified duration c)If the interest rate increases by 20 basis points, what is the approximate value of the bond by using modified duration? d)What is the real value of the bond after the change (using the bond pricing formula )?

3. A $1,000 par bond has a 5% semi-annual coupon and 12 years to maturity. Bonds...

3. A $1,000 par bond has a 5% semi-annual coupon and 12 years to maturity. Bonds of similar risk are currently yielding 6.5%. a. What should be the current price of the bond? b. If the bond’s price five years from now is $1,105, what would be the yield to maturity for the bond at that time? c. What will the price of this bond be 1 year prior to maturity if its yield to maturity is the same as...

i) You just purchased a 10-year semi-annual coupon bond with a par value of $1,000 and...

i) You just purchased a 10-year semi-annual coupon bond with a par value of $1,000 and a coupon rate of 8%. The nominal yield to maturity is 7% per annum. Calculate the market price of the bond. ii)Three years later, immediately after receiving the sixth coupon payment, you sell the bond to your best friend. Your best friend’s nominal yield to maturity is 9% per annum. Calculate the price paid by your best friend.