Hafu buys a 10-year bond with annual coupons. The par value of this bond is 10000...

Hafu buys a 10-year bond with annual coupons. The par value of this bond is 10000 as is the redemption value, and it has an annual coupon rate of 6%.

The price Hafu pays for the bond gives it an annual effective yield of 12%. Hafu has set up her investments so that the coupons are immediately deposited in a savings account with an annual effective rate of 9%. What is the annual effective yield (IRR) of Hafu’s overall investment over the 10-year term?

Expert Solution

Please use the below mentioned excel formulas and functions to compute the above spreadsheet:

ekkarill92 answered 1 year ago

Mary buys a 10-year, 1,000 par value bond with 8% semiannual coupons. The price of the...

Mary buys a 10-year, 1,000 par value bond with 8% semiannual coupons. The price of the bond to earn a yield of 6% convertible semiannually is 1,204.15. The redemption value is more than the par value. Calculate the price Mary would have to pay for the same bond to yield 10% convertible semiannually. Show all work.

Cain buys a 3-year $1000 10% bond with annual coupons, redeemable at par. The price assumes...

Cain buys a 3-year $1000 10% bond with annual coupons, redeemable at par. The price assumes an annual effective yield rate of 8%. First, find the price of this bond. Every time Belial receives a payment, he deposits the money into a savings account, with an annual effective interest rate of i. At the end of three years, he puts the last payment he receives from the bond into the savings account and observes that overall, his yield rate was...

A company buys a 100 par value bond with 5% annual coupons. The company pays a...

A company buys a 100 par value bond with 5% annual coupons. The company pays a price that will give it a yield rate of 4% effective if the bond matures at par at the end of 7 years. The company receives all coupons when due. However, at the end of 7 years, the company receives a maturity value of only 90, due to the bankruptcy of the issuer of the bond. The company's effective annual yield rate over the...

4. (4pts) A $10,000 par value 10-year bond with 8% annual coupons is bought at a...

4. (4pts) A $10,000 par value 10-year bond with 8% annual coupons is bought at a premium to yield an annual effective rate of 6%. Calculate the interest earned and the amount of premium amortized in the 7th coupon payment. Also find the total interest earned in the 10 years. (Answers: $641.58, $158.42, $6527.98)

A 3-year $100 par value bond pays 9% annual coupons. The spotrate of year 1...

A 3-year $100 par value bond pays 9% annual coupons. The spot rate of year 1 is 6%, the 2- year spot rate is 12%, and the 3-year spot rate is 13%.a) Determine the price of the bondb) Determine the yield to maturity of the bondA 2-year $100 par value bond pays 5% semi-annual coupons. The 6-month spot rate is 2%, the 1-year spot rate is 2.5%, the 18-month spot rate is 3% and the 2-year spot rate is 4%.c)...

A $1000 bond, redeemable at par, with annual coupons at 10% is purchased for $1050. If...

A $1000 bond, redeemable at par, with annual coupons at 10% is purchased for $1050. If the write-down in the book value is $20 at the end of the 1st year, what is the write-down at the end of the 4th year

A 2-year $100 par value bond pays 10% monthly coupons is sold at par. Determine its...

A 2-year $100 par value bond pays 10% monthly coupons is sold at par. Determine its effective annual rate.

. 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...

A German bond that pays annual coupons of 4.5%, has a par value of €1,000, and...

A German bond that pays annual coupons of 4.5%, has a par value of €1,000, and a YTM of 3.9%. Assuming there are 19 years until maturity, what is the current price of this bond?

A commercial bank purchased a $100M par, 10-year bond with 4% (semi-annual) coupons, and wants to...

A commercial bank purchased a $100M par, 10-year bond with 4% (semi-annual) coupons, and wants to convert this asset to be LIBOR based. A 10-year interest rate swap is available with fixed rates of 3.48% (bid) and 3.52% (offer), where all rates are semi-annual. i] Specify the swap trade. ii] What variable rate does the bank earn?

Question