A 2-year maturity bond with face value of $1,000 makes annual coupon payments of $108 and is selling at face value. What will be therate of return on the bond if its yield to maturity at the end of the year is:Note: Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places.Rate of Returna. 6%10.80%b. 10.8%c. 12.8%10.80%10.80 %

The bond is selling at face value ($1,000), which means the purchase price (P) is equal to the face…

Answered: A 2-year maturity bond with face value…

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter4: Bond Valuation

Section: Chapter Questions

Problem 14P: Current Yield with Semiannual Payments A bond that matures in 7 years sells for $1,020. The bond has...

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Bond Yields and Rates of Return A 10-year, 12% semiannual coupon bond with a par value of 1,000 may be called in 4 years at a call price of 1,060. The bond sells for 1,100. (Assume that the bond has just been issued.) a. What is the bonds yield to maturity? b. What is the bonds current yield? c. What is the bonds capital gain or loss yield? d. What is the bonds yield to call?
Bond Value as Maturity Approaches An investor has two bonds in his portfolio. Each bond matures in 4 years, has a face value of 1,000, and has a yield to maturity equal to 9.6%. One bond, Bond C, pays an annual coupon of 10%; the other bond, Bond Z, is a zero coupon bond. Assuming that the yield to maturity of each bond remains at 9.6% over the next 4 years, what will be the price of each of the bonds at the following time periods? Fill in the following table:
Current Yield with Semiannual Payments A bond that matures in 7 years sells for $1,020. The bond has a face value of $1,000 and a yield to maturity of 10.5883%. The bond pays coupons semiannually. What is the bond’s current yield?
Yield to Maturity and Yield to Call Arnot International’s bonds have a current market price of $1,200. The bonds have an 11% annual coupon payment, a $1,000 face value, and 10 years left until maturity. The bonds may be called in 5 years at 109% of face value (call price = $1,090). What is the yield to maturity? What is the yield to call if they are called in 5 years? Which yield might investors expect to earn on these bonds, and why? The bond’s indenture indicates that the call provision gives the firm the right to call them at the end of each year beginning in Year 5. In Year 5, they may be called at 109% of face value, but in each of the next 4 years the call percentage will decline by 1 percentage point. Thus, in Year 6 they may be called at 108% of face value, in Year 7 they may be called at 107% of face value, and so on. If the yield curve is horizontal and interest rates remain at their current level, when is the latest that investors might expect the firm to call the bonds?
A 2-year maturity bond with face value of $1,000 makes annual coupon payments of $88 and is selling at face value. What will be the rate of return on the bond if its yield to maturity at the end of the year is: Note: Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places. a. 6% b. 8.8% c. 10.8% Rate of Return % % %
A bond with a face value of $1,000 has 10 years until maturity, has a coupon rate of 5.2%, and sells for $1,105. 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 if interest is paid semiannually? (Do not round intermediate calculations. Enter your answer as a percent rounded to 4 decimal places.)
A bond with a face value of $1,000 has 16 years until maturity, has a coupon rate of 7.8%, and sells for $1,071. a. What is the current yield on the bond? (Enter your answer as a percent rounded to 2 decimal places.) Current yield % 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.) Yield to maturity % c. What is the yield to maturity if interest is paid semiannually? (Do not round intermediate calculations. Enter your answer as a percent rounded to 4 decimal places.) Yield to maturity %
A 2-year maturity bond with face value of $1,000 makes annual coupon payments of $80 and is selling at face value. What will be the rate of return on the bond if its yield to maturity at the end of the year is: Note: Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places.
Consider a bond that has a price of $1046.76, a coupon rate of 8.8%, a yield to maturity of 8.1%, a face value of $1000, and 10 years to maturity. What is the current yield? Enter your answer as a percentage. Do not include the percentage sign in your answer. Enter your response below. Enter your answer to 2 DECIMAL PLACES. Number %
You buy a bond for $964 that has a coupon rate of 6.60% and a maturity of 7-years. A year later, the bond price is $1,104. (Assume a face value of $1,000 and annual coupon payments.) a. What is the new yield to maturity on the bond? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.) Yield to maturity % b. What is your rate of return over the year? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.) Rate of return
Find the duration of a 9.0% coupon bond making semiannually coupon payments if it has three years until maturity and has a yield to maturity of 9.0%. What is the duration if the yield to maturity is 11.4%? Note: The face value of the bond is $1,000. Do not round intermediate calculations. Round your answers to 2 decimal places. 9% YTM 11.4% YTM Duration years years
Suppose that the prices of zero-coupon bonds with various maturities are given in the following table. The face value of each bond is $1,000. Maturity (Years) Price 1 $ 998.78 2 880.89 3 815.92 4 752.40 5 685.70 a. Calculate the forward rate of interest for each year. (Round your answers to 2 decimal places.) b. How could you construct a 1-year forward loan beginning in year 3? (Round your Rate of synthetic loan answer to 2 decimal places.) c. How could you construct a 1-year forward loan beginning in year 4? (Round your answers to 2 decimal places.)

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