Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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eBook Problem Walk-Through
A bond has a $1,000 par value, 7 years to maturity, and a 9% annual coupon and sells for $1,095.
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- eBook Problem Walk-Through d X is noncallable and has 20 years to maturity, a 7% annual coupon, and a $1,000 par value. Your required return on Bond X is 9%; if you buy it, you plan to hold it for 5 years. You (and the ket) have expectations that in 5 years, the yield to maturity on a 15-year bond with similar risk will be 12%. How much should you be willing to pay for Bond X today? (Hint: You will need to w how much the bond will be worth at the end of 5 years.) Do not round intermediate calculations. Round your answer to the nearest cent.arrow_forwardNonearrow_forwardMarket Price What is the market price of a $1,000, 8 percent bond paying a semiannual coupon if comparable market interest rates rise to 10 percent and the bond matures in 14 years? Round your answer to the nearest dollar. (Hint: Use Appendix A-2 and Appendix A-4.) Round Present Value of a Single Amount and Present Value of a Series of Equal Amounts in intermediate calculations to four decimal places. $arrow_forward
- Questions Problem 4-16 (Interest Rate Sensitivity) 1. 2. 3. 4. 5. 6. eBook 10-year, 10% annual coupon 10-year zero 5-year zero 30-year zero Perpetuity, $100 annual coupon - Icon Key Interest Rate Sensitivity A bond trader purchased each of the following bonds with a face value of $1,000 at a yield to maturity of 10%. Immediately after she purchased the bonds, interest rates fell to 6%. What is the percentage change in the price of each bond after the decline in interest rates? Fill in the following table. Do not round intermediate calculations. Round the monetary values to the nearest cent and percentage values to two decimal places. Enter your answers as positive values. Price @ 10% Problem 4-16 (Interest Rate Sensitivity) $ Price @ 6% Percentage Change ◄ Question 2 of 6 ► % Check My Work Check My Work ◄ Question 2 of 6 ►arrow_forwardeBook Yield to Maturity and Yield to Call Amot International's bonds have a current market price of $1,250. 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). a. What is the yield to maturity? Round your answer to two decimal places. % b. What is the yield to call if they are called In 5 years? Round your answer to two decimal places. c. Which yield might investors expect to earn on these bonds, and why? I. Investors would not expect the bonds to be called and to earn the YTM because the YTM is greater than the YTC. II. Investors would not expect the bonds to be called and to earn the YTM because the YTM is less than the YTC. III. Investors would expect the bonds to be called and to earn the YTC because the YTC is less than the YTM. IV. Investors would expect the bonds to be called and to earn the YTC because the YTM is less than the YTC. -Select- d. The…arrow_forwardeBook The real risk-free rate, r*, is 1.55%. Inflation is expected to average 2.25% a year for the next 4 years, after which time inflation is expected to average 3.3% a year. Assume that there is no maturity risk premium. An 11-year corporate bond has a yield of 11.45%, which includes a liquidity premium of 0.85%. What is its default risk premium? Do not round intermediate calculations. Round your answer to two decimal places. %arrow_forward
- eBook A firm's bonds have a maturity of 12 years with a $1,000 face value, have an 8% semiannual coupon, are callable in 6 years at $1,056.37, and currently sell at a price of $1,108.49. What is their nominal yield to maturity? Do not round intermediate calculations. Round your answer to two decimal places. % What is their nominal yield to call? Do not round intermediate calculations. Round your answer to two decimal places. % What return should investors expect to earn on these bonds? I. Investors would not expect the bonds to be called and to earn the YTM because the YTM is less than the YTC. II. Investors would expect the bonds to be called and to earn the YTC because the YTC is less than the YTM. III. Investors would expect the bonds to be called and to earn the YTC because the YTM is less than the YTc. IV. Investors would expect the bonds to be called and to earn the YTC because the YTC is greater than the YTM. V. Investors would not expect the bonds to be called and to earn the…arrow_forwardeBook 日 Problem Walk-Through Madsen Motors's bonds have 21 years remaining to maturity. Interest is paid annually, they have a $1,000 par value, the coupon interest rate is 6%, and the yield to maturity is 9%. What is the bond's current market price? Round your answer to the nearest cent.arrow_forwardQuestion 4 What is the price of a straight bond with: $1,000 face value, coupon rate of 5%, a YTM of 5%, and a maturity of 37 years? (round your final answer to 1 decimal place: 20.456 -->20.5) Your Answer:arrow_forward
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