A bond has a $1,000 face value and a coupon interest rate of 7.55%. It has 5 years to maturity and pays interest annually. If investors' current required yield to maturity is 7.55% for this bond, what is the Duration for this instrument today? Calculate to 4 decimal places. 4.1454 % 3.3392 years

A bond has a $1,000 face value and a coupon interest rate of 7.55%. It has 5 years to maturity and pays interest annually. If investors' current required yield to maturity is 7.55% for this bond, what is the Duration for this instrument today? Calculate to 4 decimal places. 4.1454 % 3.3392 years

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter4: Bond Valuation

Section: Chapter Questions

Problem 10P

See similar textbooks

Related questions

Q: klp.3

A: The objective of the question is to estimate the new levered beta of XYZ Corporation after it…

Q: Tanaka Industrial Systems Company is trying to decide between two different conveyor belt systems.…

A: Equivalent Annualized Cost (EAC) is the annual cost of owning and maintaining the asset over its…

Q: 19 00:48:34 You take out $10,000 loan for seven years at an annual interest rate of 5% and with…

A: Fixed annual payment refers to a yearly instalment against the loan amount. This payment includes…

Q: Your portfolio consists of 95 shares of CSH and 55 shares of EJH, which you just bought at $21.68…

A: Shares of CSH = 95Shares of EJH = 55Original price of CSH = $21.68Original price of EJH = $31.95To…

Q: Flotation costs and the cost of debt Currently, Warren Industries can sell 20-year, $1,000-par-value…

A: Flotation cost is the cost of selling the bonds in the market through intermediaries involved in the…

Q: Question content area top Part 1 Calculate the after-tax return of a(n) 8.858.85 percent,…

A: The objective of this question is to calculate the after-tax return of a corporate bond and a…

Q: Assume that you contribute $150 per month to a retirement plan for 20 years. Then you can increase…

A: Future value refers to the value an investment or cash flow is expected to grow to at a specific…

Q: QUESTION 1 You have observed a particular stock over the past year. Monthly returns have been as…

A: The objective of the first question is to calculate the average monthly returns of a particular…

Q: Milfred, Inc. has return on equity (ROE) = 29.3 percent, accounts payable days = 25 days, return on…

A: As per DuPont equation for ROE the equity multiplier can be found by using following formula:

Q: TSC, Inc. sells for $36 and pays an annual per share dividend of $2.10, which you expect to grow at…

A: Dividend = $2.10Selling price = $36Growth Rate = 5% = 0.05

Q: On April 1, 2024, Antonio purchased appliances from the Acme Appliance Company for $2,100. In order…

A: Future value refers to the compounded value of the future cash flow at the interest rate for the…

Q: Sunbird Theatre Inc. owns and operates movies theaters throughout Florida and Georgia. Sunbird…

A: A business may pay out annual dividends to its shareholders on a regular basis from its earnings.…

Q: Kinky Copies may buy a high-volume copier. The machine costs $100,000 and this cost can be fully…

A: NPV means Net present value.It is a capital budgeting technique used for making investment…

Q: You are considering opening a new plant. The plant will cost $103.2 million upfront. After that, it…

A: Plant cost = $103.2 millionAnnual profits = $ 30.9 millionCost of capital = 8.60%To find: The NPV,…

Q: son.2

A: The objective of this question is to find the effective interest rate charged on a loan of $138,160…

Q: Baghiben

A: The objective of this question is to calculate the future value of an annuity due. An annuity due is…

Q: A project is projected to cost $2,000,000 to undertake. It will generate positive cash inflows as…

A: The objective of the question is to calculate the Profitability Index (PI) of a project. The…

Q: Sport Fishing Expeditions has a debt-equity ratio of 0.80. The pre-tax cost of debt is 7% and the…

A: The cost of equity can be found by using WACC formula:

Q: a pharmacy takes up its spring time shipment of sunglasses to provide of cost and a profit of 70% of…

A: The objective of the question is to find out the maximum markdown rate that the pharmacy can apply…

Q: To borrow $3,400, you are offered an add-on interest loan at 9.6 percent with 12 monthly payments.…

A: Effective annual rate of return is the interest rate with compounding effects.

Q: One year ago, the Jenkins Family Fun Center deposited $3,400 into an investment account for the…

A: Final value of total deposits=$19,928.37Explanation:amount deposited one year ago ($3400) will yield…

Q: Jasmine won a prize: the right to receive 36 payments of $100 per month with the first payment one…

A: TVM refers to the concept that considers the effect of money's interest-earning capacity, which…

Q: Meriton Ltd expects cash flows of $13 000, $11 500, $12 750, and $9635 over the next 4 years. What…

A: Present Value refers to a concept that states the discounted value or say value at today's time of…

Q: took a business trip from New York to Denver. She spent two days in travel, conducted for five days.…

A: how much of Jordan's expenses she can deduct, we need to consider the purpose of her trip and the…

Q: Assume 30 years ago, you invested a lump sum and earned 4.65 percent interest, compounded annually.…

A: Present value, in finance, is a method used to assess the current monetary value of a future sum by…

Q: Use the table for the question(s) below. Name Gannet McClatchy Media General New York Times 2423 Lee…

A: The objective of the question is to estimate the share price of a newspaper publishing firm using…

Q: Your friend offers you an investment opportunity. If you give him $1,200 today, his project will…

A: A money market fund is a kind of mutual fund that makes bets on short-term, low-risk securities to…

Q: A pension fund manager is considering three mutual funds for investment. The first one is a stock…

A: Expected return refers to the rate of return that is being earned over the amount of investment by…

Q: You can buy a mountain bike on sale for only $572.97. What is the percent markdown if the original…

A: Original Selling price of the suitcase = $63Sale price of the suitcase = $51.99Sale price for bike =…

Q: In the 1990s, the Thai baht was pegged to the U.S. dollar at a rate of 1 baht = $0.04. This is…

A: The Thai government could raise interest rates in Thailand.Explanation:The Thai baht's fixed…

Q: Marigold Ltd. just paid a dividend of $2.00 per share, which is expected to grow at a constant rate…

A: First we need to use CAPM model to calculate required rate of return.. Required rate of return(r)…

Q: Your company has been approached to bid on a contract to sell 21,000 voice recognition (VR) computer…

A: The objective of this question is to determine the bid price for the contract that would ensure the…

Q: Cullumber Mechanical Inc.'s first dividend of $1.60 per share is expected to be paid six years from…

A: The constant growth model is a stock valuation method used in finance to determine a stock's…

Q: Related to Checkpoint 5.4) (Present-value comparison) You are offered $90,000 today or $340,000 in…

A: We have to do present value comparisons here. For that we will use and apply the time value of money…

Q: You have a loan outstanding. It requires making nine annual payments of $4,000 each at the end of…

A: A loan refers to a contract between two parties where money is forwarded by one party to the other…

Q: An investor contributes $847.00 per quarter in an account that pays 4.00% APR with quarterly…

A: Quarterly contribution = $847.00APR = 4.00%Number of years = 17 years

Q: Write a paper on performance measurement systems by comparing and contrasting between traditional…

A: The objective of this question is to write a paper comparing and contrasting traditional and…

Q: u are trying to pick the least expensive car for your new delivery service. You have two choices:…

A: EAC stands for Equivalent Annual Cost. It refers to the cost that is spent on owning, operating, and…

Q: at-the-money stock options to its management c 2026. Windy Lake's share price was $10 on the the…

A: a. Entry required at December 31, 2023:When stock options are granted, no journal entry is made as…

Q: Super Apparel wants to replace an old machine with a new one. The new machine would increase annual…

A: The Accounting Rate of Return (ARR) is a financial metric used to evaluate the profitability of an…

Q: A loan of $10,000 is taken out on November 7, 2020 at a simple interest rate of r = 9%. The loan…

A: As per the Banker's Rule, interest is calculated as per the exact time (in days), taking 360 days…

Q: 0. Bond Pricing. A 30-year- maturity bond with face value of $1,000 makes semiannual couponpayments…

A: The YTM or yield to maturity is the bond's yield that an investor can expect to earn on the bond…

Q: Number of Shoes Per Pair 10 Overhead % of Labor 11 9 12 13 Sales Volume - #pairs: 14 Selling Price…

A: Cost of materials = $46.20 per shoeDirect labor costs = $10.28 per shoeOverhead costs = $2.06 per…

Q: calculate the net present value of the following: Project A requires an initial investment of $1,000…

A: The objective of the question is to calculate the net present value (NPV) of Project A. The NPV is a…

Q: vvk.6

A: The objective of this question is to calculate the net profit Mike made from selling a call option…

Q: AMT. Inc.'s net income for this quarter is $500,000. The publicized return on assets (ROA) is 34.5 %…

A: The objective of the question is to estimate the total assets of AMT. Inc. given the net income and…

Q: What is an example of a Moral Hazard? Combustibles stored close to a heat source. Failure to…

A: Moral hazard is a serious issue in several industries, including banking, insurance, and public…

Q: Assume that Social Security promises you $43,000 per year starting when you retire 45 years from…

A: Present value is the current worth of a future sum of money, discounted back to the present. It…

Q: Your investment will pay you the following cash flow stream: YEAR | CASH FLOW 1 |200 2 10 3 100 4…

A: The time value of money is a concept in finance that takes into account the effect of compounding to…

Q: You need to borrow $750,000 to purchase a new house. JRE bank will loan you the money at an APR of…

A: A mortgage refers to a covered loan borrowed for the purchase or maintenance of a property with the…

Concept explainers

Bond Valuation

Bond valuation are the notes issued by the corporation to raise long-term funds for the business. The corporations are required to pay the interest on such liabilities at a specified rate of interest (termed as coupon rate) at specified dates which may be on semi-annual or annual basis. These interest payments may be in the form of coupons.

Question

A bond has a $1,000 face value and a coupon interest rate of 7.55%. It has 5 years to maturity and pays interest annually. If
investors' current required yield to maturity is 7.55% for this bond, what is the Duration for this instrument today? Calculate to 4
decimal places.
4.1454 %
3.3392 years

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: Bond Maturity

VIEW

Step 2: calculation of bonds duration .

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

Yield to Maturity and Yield to Call Arnot International’s bonds have a current market price of $1,200. The bonds have an 11% annual coupon payment, a $1,000 face value, and 10 years left until maturity. The bonds may be called in 5 years at 109% of face value (call price = $1,090). What is the yield to maturity? What is the yield to call if they are called in 5 years? Which yield might investors expect to earn on these bonds, and why? The bond’s indenture indicates that the call provision gives the firm the right to call them at the end of each year beginning in Year 5. In Year 5, they may be called at 109% of face value, but in each of the next 4 years the call percentage will decline by 1 percentage point. Thus, in Year 6 they may be called at 108% of face value, in Year 7 they may be called at 107% of face value, and so on. If the yield curve is horizontal and interest rates remain at their current level, when is the latest that investors might expect the firm to call the bonds?
Current Yield for Annual Payments Heath Food Corporations bonds have 7 years remaining to maturity. The bonds have a face value of 1,000 and a yield to maturity of 8%. They pay interest annually and have a 9% coupon rate. What is their current yield?
Bond Yields and Rates of Return A 10-year, 12% semiannual coupon bond with a par value of 1,000 may be called in 4 years at a call price of 1,060. The bond sells for 1,100. (Assume that the bond has just been issued.) a. What is the bonds yield to maturity? b. What is the bonds current yield? c. What is the bonds capital gain or loss yield? d. What is the bonds yield to call?
A bond that matures in 10 years has a $1,000 par value. The annual coupon interest rate is 8 percent and the market's required yield to maturity on a comparable-risk bond is 13 percent. What would be the value of this bond if it paid interest annually? What would be the value of this bond if it paid interest semiannually? Question content area bottom Part 1 a. The value of this bond if it paid interest annually would be $enter your response here.
Consider bond A with a face value of $500,000 to be repaid at maturity. The maturity of the bond is 2 years. The coupon rate is 8% per annum and coupon payments are made semiannually. The current market rate is 6% p.a. What is the bond’s duration ? Round your final answer to 2 decimal places. E.g. if the final answer is -3.59 years, type -3.59 in the answer box. If the final answer is 3.59 years, type 3.59 in the box .
A bond has the following features: Coupon rate of interest (paid annually): 12 percent Principal: $1,000 Term to maturity: 11 years What will the holder receive when the bond matures? If the current rate of interest on comparable debt is 8 percent, what should be the price of this bond? Assume that the bond pays interest annually. Use Appendix B and Appendix D to answer the question. Round your answer to the nearest dollar. $ Would you expect the firm to call this bond? Why? , since the bond is selling for a . If the bond has a sinking fund that requires the firm to set aside annually with a trustee sufficient funds to retire the entire issue at maturity, how much must the firm remit each year for eleven years if the funds earn 8 percent annually and there is $90 million outstanding? Use Appendix C to answer the question. Round your answer to the nearest dollar. $
A 10-year bond with a face value of $1,000 has a coupon rate of 9.0%, with semiannual payments. a. What is the coupon payment for this bond? b. Enter the cash flows for the bond on a timeline. a. What is the coupon payment for this bond? The coupon payment for this bond is $ every six months. (Round to the nearest cent.)
A bond has 10 years until maturity, carries a coupon rate of 9%, and sells for $1,100. Interest is paid annually. a) If the bond has a yeild to maturity of 9% 1 year from now, what will its price be at that time? b) What will be the rate of return on the bond? c) Now assume that interest is paid semannually. What will be the rate of return on the bond? d) If the inflation rate during the year is 3% what is the real rate of return on the bond?
A bond has a face value of $1,000. If this bond will mature in 5 years, pays interest semiannually, and has a coupon rate of 6%, what is the yield to maturity on this bond if it is currently selling for $720? (Show your work to receive full credit)