A 20-year bond with 8% annual coupons is purchased at a price of P. The face amount of the bond is F. The price assumes anannual effective yield rate of 4%.The change in book value of the bond during the 8th year is equal to 43.24.Calculate P.2,3152,4702,6252,780.E3,085Grade & Review >

1. Coupon Rate:The coupon rate is the annual interest rate paid by the bond issuer to the…

Answered: A 20-year bond with 8% annual coupons…

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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A 7-year, 10% annual-pay bond has a par value of $1,000. If its yield-to-maturity (YTM) is 12.4%, the amount earned from reinvestment of the coupon payment is closest to A. $239.47. B. $321.41. C. $480.06. D. $500.79.
Consider a bond with a modified duration (in years) of 3.2. Coupon rate and yield to maturity are the same. Par value is $1,000. Estimate the percentage change in price for a 200 basis-point increase in interest rates. А. -5.4% B. -6.4% С. -8.6% D. 4.8% QUESTION 15 Using the information in Question 14 above, estimate the price of the bond for a 200 basis-point increase in interest rates. А. $936 В. $1002 C. $964 D. $1012
1. Compute for a present value of the bond with details below: FV: P500,000 Coupon rate: 4.5% Discounted amount: P435,000 Term: 12 years Rate of return: 4.5 % (assumed rate only) Note: Compute for present value of 6-year and 8-year term. 2. Based on the above, compute YTM.
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(i) Complete the information requested for each of the following $1000 face value, zero coupon bonds assuming semi-annual compounding. Bond Maturity (year) YTM (%) Price at t=0 A 20 12 ? B ? 8 601 350 (ii) Assume that you purchased an 8%, 20-year, $1000 par, semi-annual payment bond priced at $1012.50 with 12 years remaining till maturity. Determine a. Promised yield to maturity b. Yield to call if the bond is callable in three years with 8% premium on par value. c. What would be the price of bond 3 years from now. (iii) Bonds of Francesca Corporation with a par value of $1000 sell for $960, mature in 5 years and have a 7% annual coupon paid semi-annually. Estimate a. Current yield b. Capital Gain Yield c. Promised Yield to maturity d. Realized or horizon yield for an investor with a three year holding period and reinvestment rate of 6% over the holding period. At the end of three years the 7% coupon bonds with 2 year remaining till maturity will sell to yield 7%. (iv) Discuss two…
You purchase a zero coupon bond with 12 years to maturity and a yield to maturity of 4.93 percent. The bond has a par value of $1,000. What is the implicit interest for the first year? Assume semiannual compounding. a.$27.12 b.$26.89 c.$27.82 d.$24.34 e.$26.71
Answer the following.
A. Compute the current price of each of the following bonds (assume $1,000 par value): a. 6 year, 6% quarterly bond; 12% market yield b. 20 year zero coupon bond; 6% market yield c. 10 year, 10% semiannual bond; 8% market yield
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A 20-year bond with 8% annual coupons is purchased at a price of P. The face amount of the bond is F. The price assumes an annual effective yield rate of 4%. The change in book value of the bond during the 8th year is equal to 43.24. Calculate P. 2,315 2,470 2,625 2,780. E 3,085 Grade & Review >