Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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- am. 116.arrow_forwardA corporate bond with a 7.600 percent coupon has 15 years left to maturity. It has had a credit rating of BB and a yield to maturity of 9.9 percent. The firm has recently become more financially stable and the rating agency is upgrading the bonds to BBB. The new appropriate discount rate will be 8.8 percent. (Assume interest payments are semiannual.) What will be the change in the bond's price in dollars? What will be the change in the percentage terms? Note: Do not round intermediate calculations. Round your final answer to 2 decimal places. Change in bond price $78.90 Change in bond percent %arrow_forward✪ 1. (10) Wine and Roses, Inc. offers an 7 percent coupon bond with semiannual payments and a yield to maturity of 5 percent. The bond matures in 30 years. a. What is the market price of a $1,000 face value bond? b. What is the current yield of the bond? c. Suppose that the bond will make a coupon payment in 35 days and an owner of this bond is contemplating to sell it. What is the accrued interest the seller is entitled to receive in this case? Assume 30 days/montharrow_forward
- An investor is considering between purchasing a Treasury Bond and a bond from a large corporation. Both bonds have a face value of $1,000. The Treasury Bond has no risk, while the corporate bond has a 10% change of not repaying (a default). Both bonds are 2-year bonds and don't pay any coupons, only the final payment at maturity. a) Assuming that the interest rate in year 1 is 10% and in year 2 is expected to be 5%, what is the current price of each bond? Why are the values different? b) Now assume that the investor purchased the Treasury Bond a year has passed. How much can this bond be sold for if the interest rate is confirmed at 5%? c) Continue assuming that the investor purchased the Treasury Bond a year has passed. If the investor is offered the corporate bond for $800, should it be purchased? Explain.arrow_forwardYour answer is correct. Cullumber, Inc., has a bond issue maturing in seven years that is paying a coupon rate of 7.5 percent (semiannual payments). Management wants to retire a portion of the issue by buying the securities in the open market. If it can refinance at 6.0 percent, how much will Cullumber pay to buy back its current outstanding bonds? Assume face value is $1,000. (Round answer to 2 decimal places, e.g. 15.25.) Cullumber will pay +A $ 1084.72arrow_forwardyou bought a 30-year bonds many years ago. The bond has par value of $ 1,000 and coupon rate of 12%, paid semi-annually. The current price of the bond is $1,137.99 and the yield to maturity is 10%. How many years ago did yoy buy 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 surearrow_forward
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