A $1,000 par value bond was originally issued with a 30 year maturity and a 9% coupon rate. 8 years have passed since the bond was issued and the bond now has 22 years left until maturity. If an investor has a required return of 6%, how much should they pay for this bond?
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A $1,000 par
Please break it down i got 1344.10 and it was wrong. please break it down so that i can learn it
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- You just bought a newly issued bond which has a face value of $1,000 and pays its coupon once annually. Its coupon rate is 6%, maturity is 20 years and the yield to maturity for the bond is currently 8%. a. Do you expect the bond price to change in the future when the yield stays at 8%? Why or why not? Explain. (No calculation is necessary to answer this part of the question.) b. Calculate what the bond price would be in one year if its yield to maturity stays at 8%. c. Find the before-tax holding-period return for a one-year investment period if the bond sells at a yield to maturity of 7% by the end of the year (year 1). d. Suppose that the ordinary income tax rate is 40% and the capital gains tax rate is 30%. When the ordinary income tax rate is higher than the capital gains tax rate, tax authorities typically tax anticipated price appreciations from bonds at the higher ordinary income rate in order to prevent tax aversion with discount bonds. Suppose that from the total dollar…A bond has a coupon rate of 5% and a 20 year maturity. In order to purchase this bond, an investor requires a return of 9%. Market interest rates have _____ since this bond was issued which will cause _____ to want this bond. Decreased; no one Decreased; everyone Increased; no one Increased; everyone1. True or False? Last year you purchased a bond with an interest rate of 5 percent. Now the interest rate on the bond market drops to 4%. Then you will receive the same amount of coupon payments from the issuer while you are holding the bond. 2. True or False? The current interest rate on a 10-year coupon bond (with face value = $1,000 and annual coupon rate = 3.25%) is 2.42%. This implies the buyer's return for holding the bond for 10 years will be 2.42% 3. A coupon bond with a face value $800 and a $40 coupon payment every year is sold for $1000. This bond has a coupon rate of _____ %
- A zero-coupon bond has a $100 face value, matures in 10 years and currently sells for $781.20 . a What is the market’s required return on this bond? b Suppose you hold this bond for one year and sell it. At the time you sell the bond, market rates have increased to 3.5%. What return did you earn on this bond? c Suppose that, rather than buying the 10-year zero-coupon bond described at the start of this problem, you instead purchased a 10-year 2.5% coupon bond. (Assume annual payments.) Because the bond’s coupon rate equalled the market’s required return at the time of purchase, you paid face value ($100) to acquire the bond. Again assume that you held the bond for one year, received one coupon payment, and then sold the bond, but that at the time of sale, the market’s required return was 3.5%. What was your return for the year? Compare your answerhere to your answer in part (b).A $1,000 bond has a 7.5 percent coupon and matures after ten years. If current interest rates are ten percent, what should be the price of the bond? If after six years interest rates are still ten percent, what should be the price of the bond? Even though interest rates did not change in a and b, why did the price of the bond change? Change the interest rate in a and b to 6 percent and rework your answers. Even though the interest rate is 6 percent in both calculations, why are the bond prices different? Use semi- annual interest payments if it applies to any of these questions. Im completely lost on this.You are thinking about buying a 10-year bond that was issued 2 years ago. The coupon rate is 5% paid semi-annually. The company that issued the bond has not performed too well and you decide that you need a 5.79% annual rate of return in order to compensate you for the risk. What should you pay for one bond. Round to nearest $ and use $ symbol.
- You are purchasing a 20-year bond that matures in 6 years. The bond has a par value of $5,000, coupon rate of 3%, and is selling on the secondary market for $4,800. a. What is the Yield to Maturity of this bond now? b. What has happened to interest rates since this bond was issued 15 years ago? Explain.A bond has a coupon rate of 7.9% and pays coupons annually. The bond matures in 4 years and the yield to maturity on similar bonds is 6.7%. What is the price of the bond? Note:- Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism. Answer completely. You will get up vote for sure.Five years ago, you purchased a corporate for 942.41. At the time, the bond had a YTM of 10% and 9 years left to maturity. Today, the YTM on your bond is 8%. with this information, calculate the realized rate of return on the bond knowing that you bought the bond five years ago, you sold the bond today, you never reinvested the coupons paid on the bond, and the coupon rate on the bond is (9%,2).
- A government bond that originally cost $5000 with a yield of 6% (simple interest) has 5 years left before redemption. i. Determine its present value if the prevailing rate of interest is 10%. Briefly explain the steps in your own words. ii. Is it worth purchasing this bond? Provide your own reasoning.can you answer the question without using excell please. Normal written way. A 4-year 5.8% coupon bond is selling to yield 7%. The bond pays interest annually. One year later interest rates decrease from 7% to 6.2%. Assuming the face value of the bond is 100 a.What is the price of the 4-year 5.8% coupon bond sellingto yield 7%? b.What is the price of this bond one year later assuming the yield is unchanged at 7%? c.What is the price of this bond one year later if instead of the yield being unchanged the yield decreases to 6.2%? d.Calculate the following: Price change attributable to moving to maturity (no change in the discount rate)?Price change attribute to an increase in the discount rate from 7% to 6.2%?Total price change?Bond A pays $12,000 in 28 years. Bond B pays $12,000 in 14 years. (To keep things simple, assume these are zero-coupon bonds, which means the $12,000 is the only payment the bondholder receives.) Suppose the interest rate is 5 percent. Using the rule of 70, the value of Bond A is approximately______ , and the value of Bond B is approximately______ . Now suppose the interest rate increases to 10 percent. Using the rule of 70, the value of Bond A is now approximately ____ , and the value of Bond B is approximately______ . Comparing each bond's value at 5 percent versus 10 percent, Bond A's value decreases by a______ percentage than Bond B's value. The value of a bond _______ when the interest rate increases, and bonds with a longer time to maturity are______ sensitive to changes in the interest rate.