Question
In: Finance
A bond with 30 years to maturity has a face value of $1,000. The bond pays...
A bond with 30 years to maturity has a face value of $1,000. The bond pays an 8 percent semiannual coupon, and the bond has a 7 percent nominal yield to maturity. What is the price of the bond today? DO NOT USE EXCEL
Solutions
Expert Solution
| Price of bond is the present value of cash flow from bond. | |||||||||||
| Present value of coupon | $ 997.79 | ||||||||||
| Present value of face value | $ 126.93 | ||||||||||
| Present value of cash flow | $ 1,124.72 | ||||||||||
| So, price of bond is | $ 1,124.72 | ||||||||||
| Working: | |||||||||||
| # 1 | Semi annual coupon | = | 1000*4% | = | 40 | ||||||
| # 2 | Present value of annuity of 1 | = | (1-(1+i)^-n)/i | Where, | |||||||
| = | (1-(1+0.035)^-60)/0.035 | i | 3.50% | ||||||||
| = | 24.94473 | n | 60 | ||||||||
| # 3 | Present value of 1 | = | (1+0.035)^-60 | ||||||||
| = | 0.126934 | ||||||||||
| # 4 | Present value of coupon | = | Coupon * Present value of annuity of 1 | ||||||||
| = | 40.00 | * | 24.94473 | ||||||||
| = | 997.79 | ||||||||||
| # 5 | Present value of face value | = | Face value * present value of 1 | ||||||||
| = | 1000 | * | 0.126934 | ||||||||
| = | 126.93 | ||||||||||
jeff jeffy answered 1 year agoRelated Solutions
A bond with 10 years to maturity has a face value of $1,000. The bond pays an...
A bond with 10 years to maturity has a face value of
$1,000. The bond pays an 8 percent semiannual coupon,
and the bond has a 10.8 percent nominal yield to
maturity. What is the price of the bond today?
1. A bond with 10 years to maturity has a face value of $1,000. The bond...
1. A bond with 10 years to maturity has a face value of $1,000.
The bond can be called in four years for $1050. The bond pays an 6
percent semiannual coupon, and the bond has a 3.3 percent nominal
yield to maturity. What is the price of the bond today
assuming that it will be called?
2.
A corporate bond that matures in 12 years pays a 9 percent
annual coupon, has a face value of $1,000, and a current...
A bond has 1,000 par value , 17 years to maturity and pays a coupon of...
A
bond has 1,000 par value , 17 years to maturity and pays a coupon
of 5.25 per year semi annually. The bond is callable in 7 years at
105% of its par value. if the blnfs yield to call is 5.06% per
year, what is its annual yield to maturity
A bond has a $1,000 par value, 14 years to maturity, and pays a coupon of...
A bond has a $1,000 par value, 14 years to maturity, and pays a
coupon of 8.25% per year, annually. You expect the bond’s yield to
maturity to be 7.0% per year in five years. If you plan to buy the
bond today and sell it in five years, what is the most that you can
pay for the bond and still earn at least a 9.0% per year return on
your investment?
A bond has a par value of $1,000, has 30 years to maturity, and makes annual...
A bond has a par value of $1,000, has 30 years to maturity, and
makes annual coupon payments of $50. Which of the following
statements is NOT true?
Group of answer choices
At a market interest rate of 5%, the bond sells for par.
If the bond’s market interest rate is 6%, the bond sells at a
discount.
If the bond’s market interest rate is 5%, and if this bond paid
semiannual coupons, the price would be higher holding everything...
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...
A bond with a face value of $1,000 has 10 years until maturity, carries a coupon...
A bond with a face value of $1,000 has 10 years until maturity,
carries a coupon rate of 7.7%, and sells for $1,130. Interest is
paid annually.
a. If the bond has a yield to maturity of 10.3%
1 year from now, what will its price be at that time? (Do
not round intermediate calculations.)
b. What will be the annual rate of return on
the bond? (Do not round intermediate calculations. Enter
your answer as a percent rounded to...
A bond with a face value of $1,000 has 10 years until maturity, carries a coupon...
A bond with a face value of $1,000 has 10 years until maturity,
carries a coupon rate of 7.1%, and sells for $1,190. Interest is
paid annually. (Assume a face value of $1,000 and annual coupon
payments.) a. If the bond has a yield to maturity of 10.9% 1 year
from now, what will its price be at that time? (Do not round
intermediate calculations. Round your answer to nearest whole
number.) b. What will be the rate of return...
A bond with a face value of $1,000 has 10 years until maturity, carries a coupon...
A bond with a face value of $1,000 has 10 years until maturity,
carries a coupon rate of 7.6%, and sells for $1,140. Interest is
paid annually. (Assume a face value of $1,000 and annual coupon
payments.)
a. If the bond has a yield to maturity of 10.4%
1 year from now, what will its price be at that time? (Do
not round intermediate calculations.
Round your answer to nearest whole
number.)
b. What will be the rate of return...
A bond with a face value of $1,000 has 10 years until maturity, carries a coupon...
A bond with a face value of $1,000 has 10 years until maturity,
carries a coupon rate of 8.9%, and sells for $1,110. Interest is
paid annually. a. If the bond has a yield to maturity of 9.1% 1
year from now, what will its price be at that time? (Do not round
intermediate calculations. Round your anser to nearest whole
number.) b. What will be the annual rate of return on the bond? (Do
not round intermediate calculations. Enter...
ADVERTISEMENT
ADVERTISEMENT
Latest Questions
- Large lots are desirable in supply chain coordination despite increasing holding costs.
- ***Convert the C++ to Python*** #include <iostream> using std::cout; using std::cin; using std::endl; int charClass; char...
- Make-or-Buy Decision Fremont Computer Company has been purchasing carrying cases for its portable computers at a...
- The following costs were incurred for the single product produced during the first year of operations...
- Non-constant growth model: Do=$2.00 required return on equity= 5% g= 9% n=1,2 g=7% n=3,4 g=3% n=5...
- . Find all x ∈ Z143 such that x2Ξ 7 (mod 143). Please explain all steps...
- #Python: A palindrome is a sequence of characters that reads the same backwards as forwards. For...
ADVERTISEMENT