3. (ch,19) A 10-year maturity mortgage-backed bond is issued. The bond is a zero-coupon bond that promises to pay $10,000 (par) after 10 years. At issue, bond market investors require a 15 percent interest rate on the bond. What is the initial price on the bond? (A) $2,252 (B) $2,472 (C) $8,696 (D) $10,000

3. (ch,19) A 10-year maturity mortgage-backed bond is issued. The bond is a zero-coupon bond that promises to pay $10,000 (par) after 10 years. At issue, bond market investors require a 15 percent interest rate on the bond. What is the initial price on the bond? (A) $2,252 (B) $2,472 (C) $8,696 (D) $10,000

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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(Related to Checkpoint 9.2) (Yield to maturity) The Saleemi Corporation's $1,000 bonds pay 6 percent interest annually and have 8 years until maturity. You can purchase the bond for $1.115. a. What is the yield to maturity on this bond? b. Should you purchase the bond if the yield to maturity on a comparable-risk bond is 3 percent?
(Valuing bonds) A 14-year, $1000 par value Fingen bond pays 9 percent interest annually. The market price of the bond is $1100, and the market's required yield to maturity on a comparable-risk bond is 10 percent. a. Compute the bond's yield to maturity. b. Determine the value of the bond to you, given your required rate of return. c. Should you purchase the bond?
1. Bond prices and yields (S3.1) A 10-year bond is issued with a face value of $1,000, paying interest of $60 a year. If interest rates increase shortly after the bond is issued, what happens to the bond's a. Coupon rate? b. Price? c. Yield to maturity?
7. Suppose a bond is purchased with a settlement date of October 15 and the next coupon payment is on December 1. The par amount purchased on the bond is $100,000, and its annual coupon rate is 4% paid semiannually. (1) What is the accrued interest using the 30/360-day count convention? (2 points) (2) What is the accrued interest using the actual/actual day count convention? (2 points)
7. Suppose a bond is purchased with a settlement date of October 15 and the next coupon payment is on December 1. The par amount purchased on the bond is $100,000, and its annual coupon rate is 4% paid semiannually. (1) What is the accrued interest using the 30/360-day count convention? (2) What is the accrued interest using the actual/actual day count convention?
Related to Checkpoint 9.2 and Checkpoint 9.3) (Bond valuation) Fingen's 16-year,1000 $ par value bonds pay 13 percent interest annually. The market price of the bonds is $1070 and the market's required yield to maturity on a comparable-risk bond is 14 percent. a. Compute the bond's yield to maturity. b. Determine the value of the bond to you, given your required rate of return. c. Should you purchase the bond? a. What is your yield to maturity on the Fingen bonds given the market price of the bonds? % (Round to two decimal places.)
The following information relates to a forward contract written on a bond: Bond price = $95 Maturity = 1 year Coupon 1, paid in 6 months = $3; Coupon 2, paid immediately prior to maturity of forward = $2 Riskless rate of interest = 5% What is the forward price? A) $94.43 B $85.77 c) $94.79 D) $93.79
4. The Sisyphean Company has a bond outstanding with a face value of $1000 that reaches maturity in 15 years. The bond certificate indicates that the stated coupon rate for this bond is 8% and that the coupon payments are to be made semiannually. Assuming that this bond trades for $1,035.44, then what is the YTM for this bond?
Answer the question based on the following information for a bond having no expiration date: bond price = $1,000; bond fixed annual interest payment = $100; bond annual interest rate = 10 percent. If the price of this bond increases to $2,500, the interest rate will Multiple Choice rise to 25 percent. fall to 5 percent. fall to 2.5 percent. rise to 14 percent. fall to 4 percent.
(Yield to maturity) Fitzgerald's 35-year bonds pay 8 percent interest annually on a $1,000 par value. If the bonds sell at $945, what is the bond's yield to maturity? What would be the yield to maturity if the bonds paid interest semiannually? Explain the difference. a. The bond's yield to maturity if the bond pays interest annually is %. (Round to three decimal places.)
(Related to Checkpoint 9.2) (Yield to maturity) The Saleemi Corporation's $1,000 bonds pay 6 percent interest annually and have 9 years until maturity. You can purchase the bond for $1,115. a. What is the yield to maturity on this bond? b. Should you purchase the bond if the yield to maturity on a comparable-risk bond is 6 percent? a. The yield to maturity on the Saleemi bonds is %. (Round to two decimal places.) C...
(Related to Checkpoint 9.2) (Yield to maturity) The Saleemi Corporation's $1,000 bonds pay 9 percent interest annually and have 15 years until maturity. You can purchase the bond for $1,125. a. What is the yield to maturity on this bond? b. Should you purchase the bond if the yield to maturity on a comparable-risk bond is 6 percent? a. The yield to maturity on the Saleemi bonds is %. (Round to two decimal places.)

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