Answered: 8. A bond is offered for sale for…

8. A bond is offered for sale for $1,120. Its face value is $1,000 and the interest is 11% payable annually. What yield to maturity will be received if the bond matures 10 years hence?

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter5: The Time Value Of Money

Section: Chapter Questions

Problem 11P

See similar textbooks

Related questions

Q: A. P 57,620 B. P 75,260 C. P 57,720 D. P 75, A $50,000 bond has a maturity date of six years from…

A: Bonds are kind of debt instruments in which there is periodic interest payment and face value is…

Q: 4) A bond promises to pay $250 in 3 years. The annual interest rate is 5%. What is the bond's price…

A: Bond price today = Bond price 3 years from now / (1 + Interest rate)^Time

Q: A bond is issued at a price of $500 and pays a interest of $40 per year for the next 7 years. If the…

A: A bond is a kind of debt security issued by the government and private companies for raising funds…

Q: what is the principal amount to be repaid at the end of ten years? Show your work.

A: Price of the bond is the PV of all future coupons and par value discounted at the YTM. By…

Q: A $1,000 face value bond is currently quoted at 100.8. The bond pays semiannual payments of $22.50…

A: In the given question we need to calculate the coupon rate on bond using following details: Face…

Q: i-annually is redeemable at 97% at the end of 10 years. If the market price is 102, what is the yi

A: The given problem can be solved using RATE function in excel. RATE function computes yield to…

Q: How much does the $1,000 to be received upon a bond's maturity in 8 years add to the bond's price if…

A: Future value = 1000 Years = 8 Discount rate (r)= 6%

Q: What is the present value of a 10-year bond outstanding with 8 years left in “year-to-maturity,” 6%…

A: A bond is a useful tool for finance concepts. Bond market values are used by analysts and investors…

Q: 1. A bond, with a face value of P100,000 redeemable at par in 10 years, pays dividends at the rate…

A: A Bond with a face value of P100,000 redeemable at Par in 10 Years, pays dividend at the rate of 6%…

Q: 4. A bond with a par value of P 1,000 and with a bond rate of 10% payable annually is sold now for P…

A: In the given case, we have provided the par value of a bond and the interest rate. So, Annual…

Q: Lloyd's of London is selling a perpetual bond that will provide the bondholder with $100 / year…

A: In perpetual bond, interest income from the bond is recurring throughout life i.e., no maturity…

Q: A bond promises to pay $150 in one year. What is the interests rate on the bond if its price today…

A: A bond is an instrument that represents the loan that is made by the investor to the company and…

Concept explainers

Treasury Market

On-the-run securities are the most recently issued securities in the market depth and are therefore traded at some premium. The off-the-run securities are the ones issued just before the most recent ones. The on-the-run securities have a lower yield to the investor than the off-the-run securities.

Question

8. A bond is offered for sale for $1,120. Its face value is $1,000 and the interest is 11% payable
annually. What yield to maturity will be received if the bond matures 10 years hence?

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

SEE SOLUTION Check out a sample Q&A here

Step 1: Define the variables

VIEW

Step 2: Compute the values

VIEW

Solution

VIEW

Step by step

Solved in 3 steps with 2 images

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.

Similar questions

5. A bond promises to pay the bondholder equal payments of P6,000 in six-month intervals for 30 years. If the face amount is P450,000, what is the fair price of the bond? Assume that the market rate is 2% compounded annually.
A bond has the following terms: Principal amount $1,000 Semi-annual interest $45 Maturity 15 years a. What is the bond's price if comparable debt yields 11%? b. What would be the price if comparable debt yields 11% and the bond matures after ten years? c. What would be the bond's price in a. and b. if interest rates declined to 8 % ?
What is the present value of a 10-year bond outstanding with 8 years left in “year-to-maturity,” 6% annual required rate, and 4% annual payment rate?
A bond is priced at $1,100, has 10 years remaining until maturity, and has a 10% coupon, paid semiannually. What is the amount of the next interest payment?
a bond pays P340 interest per year and has a face value of P8,328 at the end of 9 years, when it has to be redeemed. If the interest of the bond is 0.19. What is the current value of the bond?
How much does the $1,000 to be received upon a bond's maturity in 8 years add to the bond's price if the appropriate discount rate is 6%?
1. A bond, with a face value of P100,000 redeemable at par in 10 years, pays dividends at the rate of 6% per annum. Determine the purchase price of the bond now and its book value at the beginning of each year if the yield on the bond is 10%.
A bond with a face value of P1,500,000 is sold at P1,400,000. If the bond matures in 5 years and pays 15 percent per annum, how much should the annual earning interest be? Round off to four decimal places in the final answer/s.
A bond has the following terms: Principal amount $1,000 Semi-annual interest $45 Maturity 15 years a. What is the bond's price if comparable debt yields 11%? b. What would be the price if comparable debt yields 11% and the bond matures after ten years? c. What are the current yields and yields in a. and b.?
Assume a $1000 bond issue at the rate of 10% for 15 years. a)What is the interest payment for this bond annually b)What is the interest payment on semi-annually c)How much should the investors pay for this bond i.e. the value
18. How much can be paid for a P 50,000, 10% bond, with interest paid semiannually, if the bond matures 12 years hence? Assume that the purchaser will be satisfied with 8% nominal interest compounded semiannually? D. P 75,620 A. P 57,620 B. P 75,260 C. P 57,720 19. A $50,000 bond has a maturity date of six years from now. The bond interest rate is 6% per year payable semiannually. At a market interest rate of 4% per year payable semiannually, the present worth of the bond is closest to: D. $55,288 A. $41,695 B. $44,291 C. $52,341 20. A 6%, $10,000 bond has interest payable annually. The bond will mature 10 years from now. At what market interest rate will the present worth of the bond be $10,000? A. At an interest rate less than 6% per year C. 6% per year D. At an interest rate greater than 7%/year B. 6% per year compounded semiannually 21. A $10,000 municipal bond has an interest rate of 6% per year, compounded semiannually. The bond will mature in 10 years. If the market interest…
Suppose a $4,500 bond will pay you $325 at the end of each quarter until the face value of the bond ($4,500) is repaid at maturity. What is the fair market value of the bond if it matures in 6 years and the market rate of return is 6.1% compounded quarterly? $9,620.42 $11,090.01 $10,991.02 $9,719.40