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Bond value and timelong dashChanging required returns Personal Finance Problem Lynn Parsons is considering investing in...
Bond value and timelong dashChanging required returns Personal Finance Problem Lynn Parsons is considering investing in either of two outstanding bonds. The bonds both have $1 comma 000 par values and 8% coupon interest rates and pay annual interest. Bond A has exactly 9 years to maturity, and bond B has 19 years to maturity. a. Calculate the present value of bond A if the required rate of return is: (1) 5%, (2) 8%, and (3) 11%. b. Calculate the present value of bond B if the required rate of return is: (1) 5%, (2) 8%, and (3) 11%. c. From your findings in parts a and b, discuss the relationship between time to maturity and changing required returns. d. If Lynn wanted to minimize interest rate risk, which bond should she purchase? Why?
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jeff jeffy answered 1 year agoRelated Solutions
Bond value and timelong -Changing required returns Personal Finance Problem Lynn Parsons is considering investing in...
Bond value and timelong -Changing required returns Personal
Finance Problem Lynn Parsons is considering investing in either
of two outstanding bonds. The bonds both have $1 000 par values
and 14% coupon interest rates and pay annual interest. Bond A has
exactly 8 years to maturity, and bond B has 18 years to
maturity.
a. Calculate the present value of bond A if the required rate
of return is: (1) 11%, (2) 14%, and (3) 17%.
b. Calculate the present...
Bond value and time—Changing required returns Personal Finance Problem Lynn Parsons is considering investing in either...
Bond value and
time—Changing
required returns Personal Finance Problem Lynn Parsons is
considering investing in either of two outstanding bonds. The bonds
both have
$1,000
par values and
13%
coupon interest rates and pay annual interest. Bond A has
exactly
10
years to maturity, and bond B has
20
years to maturity.
a. Calculate the present value of bond A if the required rate
of return is: (1)
10%,
(2)
13%,
and (3)
16%.
b. Calculate the present value of...
Bond value and time-Changing required returns Personal Finance Problem Lynn Parsons is considering investing in either...
Bond value and time-Changing required returns Personal Finance
Problem Lynn Parsons is considering investing in either of two
outstanding bonds. The bonds both have $1,000 par values and 12%
coupon interest rates and pay annual interest. Bond A has exactly 6
years to maturity, and bond B has 16 years to maturity.
a. Calculate the present value of bond A if the required rate of
return is: (1) 9%, (2) 12%, and (3) 15%. b. Calculate the
present value of...
Bond value and time: Changing required returns Lynn Parsons is considering investing in either of two...
Bond value and time: Changing required returns Lynn Parsons is
considering investing in either of two outstanding bonds. The bonds
both have $1,000 par values and 11% coupon rates and pay annual
interest. Bond A has exactly 5 years to maturity, and bond B has 15
years to maturity. Calculate the value of bond A if the required
return is (1) 8%, (2) 11%, and (3) 14%. Calculate the value of bond
B if the required return is (1) 8%,...
Bond value and time—Changing required returns Lynn Parsons is considering investing in either of two outstanding...
Bond value and time—Changing required returns
Lynn Parsons is considering investing in either of two
outstanding bonds. The bonds both have $1,000 par values and 12%
coupon interest rates and pay annual interest. Bond A has exactly 9
years to maturity, and bond B has 19
years to maturity.
a. Calculate the present value of bond A if the required rate of
return is: (1) 9%, (2) 12%, and (3)
15%.
b. Calculate the present value of bond B if...
Question 6-19 Bond value and time – changing required return Lynn Pityana is considering investing in...
Question 6-19
Bond value and time – changing required
return
Lynn Pityana is considering investing in either of two
outstanding bonds.
The bonds both have R1,000 par values and 11% coupon interest
rates and pay annual interest
Bond A has exactly five years to maturity and Bond B has 15
years to maturity
Calculate the value of bond A if the required return is (1) 8%
and (2) 11% and (3) 14%
Calculate the value of bond B if the...
. Lynn Parsons is considering investing in either of two outstanding bonds. The bonds both have...
. Lynn Parsons is considering investing in either of two
outstanding bonds. The bonds both have $1000 par values and 11 %
coupon interest rates and pay annual interest. Bond A has exactly 9
years to maturity, and bond B has 19 years to maturity. a.
Calculate the present value of bond A if the required rate of
return is: (1) 8 %, (2) 11 %, and (3) 14 %. b. Calculate the
present value of bond B if the...
Problem 1: You are considering investing in a 10-year bond issued by NewEnergy Inc. This bond...
Problem 1:
You are considering investing in a 10-year bond issued by NewEnergy
Inc. This bond has $1000 face value, 4% coupon rate.
The bond
pays coupons semi-annually and is currently selling at $920. The
bond can be called at a $1,040 in 3 years.
1.c. (6 points)
What is the yield to maturity if you purchase the bond at the
current price of $920? (Use RATE function)
N=
FV=
PMT=
PV=
PMT Type=
Periodic Discount Rate=
Yield to Maturity...
Problem 1: You are considering investing in a 10-year bond issued by NewEnergy Inc. This bond...
Problem 1:
You are considering investing in a 10-year bond issued by NewEnergy
Inc. This bond has $1000 face value, 4% coupon rate.
The bond
pays coupons semi-annually and is currently selling at $920. The
bond can be called at a $1,040 in 3 years.
Draw a chart to show the relationship between bond yield and
bond price.
Yield versu Price Data
Yield
Price
0%
1%
2%
3%
4%
5%
6%
7%
8%
9%
10%
11%
12%
13%
14%
15%
Bond value and changing required returns Bond X pays an 8% annual coupon and Bond Y pays...
Bond value and changing required returns Bond X pays
an 8% annual coupon and Bond Y pays a 4% annual coupon. Both bonds
have 10 years to maturity. The yield to maturity for both bonds is
now 8%.
a. If the interest rate suddenly rises by 2%, by what percentage
will the price of the two bonds change?
b. If the interest rate suddenly drops by 2%, by what percentage
will the price of the two bonds change?
c. Which bond...
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