Question

Please Answer the following:

1.Kenneth Clark just received a cash gift from his grandfather. He plans to invest in a five-year bond issued by Pharoah Corp. that pays an annual coupon rate of 5.5 percent. If the current market rate is 7.00 percent, what is the maximum amount Kenneth should be willing to pay for this bond? (Round answer to 2 decimal places, e.g. 15.25.)

Kenneth Should Pay ?

2.Oriole, Inc., has issued a three-year bond that pays a coupon rate of 6.9 percent. Coupon payments are made semiannually. Given the market rate of interest of 4.8 percent, what is the market value of the bond? (Round answer to 2 decimal places, e.g. 15.25.)

The Market Value is?

3.Maria Miller is interested in buying a five-year zero coupon bond with a face value of $1,000. She understands that the market interest rate for similar investments is 10.6 percent. Assume annual coupon payments. What is the current value of this bond? (Round answer to 2 decimal places, e.g. 15.25.)

Current Value of Bond ?

4.Pharoah Real Estate Company management is planning to fund a development project by issuing 10-year zero coupon bonds with a face value of $1,000. Assuming semiannual compounding, what will be the price of these bonds if the appropriate discount rate is 10.0 percent? (Round answer to 2 decimal places, e.g. 15.25.)

Price OF Bond ?

5.Steven Garcia bought 10-year, 11.7 percent coupon bonds issued by the U.S. Treasury three years ago at $906.82. If he sells these bonds, for which he paid the face value of $1,000, at the current price of $836.58, what is his realized yield on the bonds? Assume similar coupon-paying bonds make annual coupon payments. (Round intermediate calculations to 5 decimal places, e.g. 1.25145 and final answer to 2 decimal places, e.g. 15.25%.)

​​​​​​​Realised rate of return ....%

Answer 1

1.Kenneth Clark just received a cash gift from his grandfather. He plans to invest in a five-year bond issued by Pharoah Corp. that pays an annual coupon rate of 5.5 percent. If the current market rate is 7.00 percent, what is the maximum amount Kenneth should be willing to pay for this bond? (Round answer to 2 decimal places, e.g. 15.25.)
Face Value of Bond	$ 1,000.00
Coupon Rate	5.50%
Annual Coupon Payment	$       55.00
YTM	7%
Period	5
Present Value of Bonds	$     938.50
Kenneth Should Pay	$     938.50
2.Oriole, Inc., has issued a three-year bond that pays a coupon rate of 6.9 percent. Coupon payments are made semiannually. Given the market rate of interest of 4.8 percent, what is the market value of the bond? (Round answer to 2 decimal places, e.g. 15.25.)
Face Value of Bond	$ 1,000.00
Coupon Rate = 6.9%/2	3.45%
Annual Coupon Payment	$       34.50
YTM = 4.8%/2	2.40%
Period = 3 x 2	6
Present Value of Bonds	$ 1,058.03
The Market Value is	$ 1,058.03
3.Maria Miller is interested in buying a five-year zero coupon bond with a face value of $1,000. She understands that the market interest rate for similar investments is 10.6 percent. Assume annual coupon payments. What is the current value of this bond? (Round answer to 2 decimal places, e.g. 15.25.)
Face Value of Bond	$ 1,000.00
Coupon Rate	0.00%
Annual Coupon Payment	$            -
YTM	10.6%
Period	5
Present Value of Bonds	$     604.26
Current Value of Bond	$     604.26
4.Pharoah Real Estate Company management is planning to fund a development project by issuing 10-year zero coupon bonds with a face value of $1,000. Assuming semiannual compounding, what will be the price of these bonds if the appropriate discount rate is 10.0 percent? (Round answer to 2 decimal places, e.g. 15.25.)
Face Value of Bond	$ 1,000.00
Coupon Rate = 0%/2	0.00%
Annual Coupon Payment	$            -
YTM = 10%/2	5.00%
Period = 10 x 2	20
Present Value of Bonds	$     376.89
Price OF Bond	$     376.89
5.Steven Garcia bought 10-year, 11.7 percent coupon bonds issued by the U.S. Treasury three years ago at $906.82. If he sells these bonds, for which he paid the face value of $1,000, at the current price of $836.58, what is his realized yield on the bonds? Assume similar coupon-paying bonds make annual coupon payments. (Round intermediate calculations to 5 decimal places, e.g. 1.25145 and final answer to 2 decimal places, e.g. 15.25%.)
Purchase price of bond	$     906.82
Coupon Rate	11.70%
Annual Coupon Payment	$     106.10
Years investment held = n	3
Present Value of Bonds	836.58
Realized rate of Return	15.10%