In: Finance

Consider the following Nestle Inc bond: maturity: 10 years, coupon rate: 6% (paid semi-annually), face value: $1000. Your investment advisor has told you that the yield-to-maturity on this bond is 6.5%.

What should be the price of this bond?

**Solution :**

**The Price of the bond of Nestle Inc. bond should be = $
963.65**

**= $ 964 ( when rounded off to the nearest whole number
)**

**Note :**

1. Since Interest is payable half yearly and the no. of years to maturity is 10 years, the price per bond is calculated by converting 10 years into (10 * 2) = 20 half yearly periods

2. Thus, the Interest earned per period = $ 1000 * 6 % * (6/12) = $ 30

3. Since the Interest is paid semi annually the discount rate used is = 6.5 % * (6/12) = 3.25 %

**Please find the attached screenshot of the excel sheet
containing the detailed calculation for the solution.**

A $1,000 bond with a coupon rate of 5% paid semi-annually has 10
years to maturity and a yield to maturity of 7%. The price of the
bond is closest to $________. Input your
answer without the $ sign and round your answer to
two decimal places.

Consider a bond with 10,000 USD par value, 8% coupon rate paid
semi annually and 10 years to maturity. Assuming a 10% required
return, answer the following questions:
Find the PV of the bond
Find the PV of the bond given it’s a Zero-Coupon Bond.
What is the bond’s price elasticity if the required return
changed to 12%?
Calculate the duration of the bond.
What is the modified duration at an 8% yield?
What is the percentage change in bond’s...

A $5,000 bond with a
coupon rate of 6.4% paid semi-annually has four years to maturity
and a yield to maturity of 6.2%. If interest rates fall and the
yield to maturity decreases by 0.8%, what will happen to the price
of the bond?
a.
Fall by $40.49.
b.
Rise by $142.78.
c.
Rise by $84.46.
d.
Fall by $98.64.
e.
None of the answers
are correct.

A $1,000 bond with a coupon rate of 5% paid semi-annually has 7
years to maturity and a yield to maturity of 9%. The price of the
bond is closest to $________. Input your
answer without the $ sign and round your answer to
two decimal places.

A $1,000 bond with a coupon rate of 5% paid semi-annually has 8
years to maturity and a yield to maturity of 9%. The price of the
bond is closest to $________. Input your answer without the $ sign
and round your answer to two decimal places.

3. A bond with a face value of $100,000 and coupon interest paid
semi-annually at an annual rate of 7.50% per annum was issued on 8
May 2013 for 4 years. Similar bonds are now selling at a
yield-to-maturity of 7.41% per annum. Based on the most recent and
next coupon dates, work out the accrued interest on the settlement
date (20-Jan-2015). Please use Actual/Actual as the interest rate
basis and leave the Calc_method as its default.

Bond
Coupon Rate
Maturity
Price Per $100 Face Value
Yield to Maturity- annual rate, compounded
semi-annually
Vermeero
4%
5 years
???
6.00%
Renwaro
0%
5.5 years
74.1993
????
a) Draw a diagram showing the cash flow for each of the
bonds
b) Calculate the price of the Vermeero bond
c) Calculate the yield to maturity for the Renwaro bond
d) Suppose you purchase the Renwaro bond today. You plan to sell
this bond one year from now, and you forecast...

Bond
Coupon Rate
Maturity
Price Per $100 Face Value
Yield to Maturity- annual rate, compounded
semi-annually
Vermeero Enterprises
4%
5 years
???
6.00%
Renwaro Company
0%
5.5 years
74.1993
????
a) Draw a diagram showing the cash flow for each of the
bonds
b) Calculate the price of the Vermeero bond
c) Calculate the yield to maturity for the Renwaro bond
d) Suppose you purchase the Renwaro bond today. You plan to sell
this bond one year from now, and...

The $1,000 face value EFG bond has a coupon of 10% (paid
semi-annually), matures in 4 years, and has current price of
$1,140. What is the EFG bond's yield to maturity?

Consider a 10 year bond with face value $1,000 that pays a 6.8%
coupon semi-annually and has a yield-to-maturity of 8.4%. What is
the approximate percentage change in the price of bond if interest
rates in the economy are expected to decrease by 0.60% per year?
Submit your answer as a percentage and round to two decimal places.
(Hint: What is the expected price of the bond before and after the
change in interest rates?)
To answer the question:
(1)...

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