A $1,000 par value bond was issued 30 years ago at a 12 percent coupon rate. It currently has 15 years remaining to maturity. Interest rates on similar obligations are now 8 percent. Assume Ms. Bright bought the bond three years ago when it had a price of $1,060. Further assume Ms. Bright paid 35 percent of the purchase price in cash and borrowed the rest (known as buying on margin). She used the interest payments from the bond to cover the interest costs on the loan. a. What is the current price of the bond? Use Table 16-2. (Input your answer to 2 decimal places.) Price of the bond b. What is her dollar profit based on the bond's current price? (Do not round intermediate calculations and round your answer to 2 decimal places.) Dollar profit c. How much of the purchase price of $1,060 did Ms. Bright pay in cash? (Do not round intermediate calculations and round your answer to 2 decimal places.) Purchase price paid in cash

A $1,000 par value bond was issued 30 years ago at a 12 percent coupon rate. It currently has 15 years remaining to maturity. Interest rates on similar obligations are now 8 percent. Assume Ms. Bright bought the bond three years ago when it had a price of $1,060. Further assume Ms. Bright paid 35 percent of the purchase price in cash and borrowed the rest (known as buying on margin). She used the interest payments from the bond to cover the interest costs on the loan. a. What is the current price of the bond? Use Table 16-2. (Input your answer to 2 decimal places.) Price of the bond b. What is her dollar profit based on the bond's current price? (Do not round intermediate calculations and round your answer to 2 decimal places.) Dollar profit c. How much of the purchase price of $1,060 did Ms. Bright pay in cash? (Do not round intermediate calculations and round your answer to 2 decimal places.) Purchase price paid in cash

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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Albert purchased a bond with exactly 20 years to redemption. The bond pays annual coupons, in arrears, of 5% per annum and is redeemed at par. Albert, who is not liable to pay tax, will obtain a gross redemption yield of 6% per annum if he holds the bond utill redemption. (a) Calculate the purchase price Albert paid for the bond, per $100 nominal if his intention was to hold the bond utill redemption. (b) After exactly ten years, immediately after receiving payment of the coupon then due, Albert sells the bond to Vicky who is liable to pay income tax and capital gains tax at a rate of 30%. The bond is purchased by Vicky to provide a net rate of return of 6.5% per annum. (i) Calculate the price Vicky paid for the bond, per $100 nominal. (ii) Using trial-and-error followed by linear interpolation, calculate the annual effective rate of return, correct to 4 decimal places, earned by Albert during the period for which he held the bond.
Silvia is thinking about investing money into a bond to diversify her investments. Company X issued 12 bonds at a face value of $43500 and a 17.5% nominal interest rate paid semiannually to raise capital for an upcoming factory expansion. The face value of the bond is $43500. The bond is a 10 year bond. As the bond was issued, the current nominal interest rate in the market is 7.0% compounded monthly. What is the maximum price Silvia should be pay for a single bond from company X?
Four years ago, Helen Stills bought six-year, 5.0 percent coupon bonds issued by the Ivanhoe Corp. for $954.80. If she sells these bonds at the current price of $892.92, what will be her realized yield on the bonds? Assume similar coupon-paying bonds make annual coupon payments. (Round intermediate calculations to 5 decimal places, e.g. 1.25145 and final answer to 2 decimal places, e.g. 15.25%.)
Please show complete steps thanks and explain everything. All parts or skip pls
Four years ago, Sandra Stills bought six-year, 5.5 percent coupon bonds issued by the Oriole Corp. For $944.99 she sells these bonds at the current price of $892.26, what will be her realized yield on the bonds? Assume similar coupon-paying bonds make annual coupon payments. Assume face value is $1000. (Round to 2 decimal places)
Four years ago, Sandra Stills bought six-year, 5.5 percent coupon bonds issued by the Oriole Corp. for $944.99. If she sells these bonds at the current price of $892.26, what will be her realized yield on the bonds? Assume similar coupon-paying bonds make annual coupon payments. Assume face value is $1,000. (Round intermediate calculations to 5 decimal places, e.g. 1.25145 and final answer to 2 decimal places, e.g. 15.25%.) Realised rate of return %
ABC Company issued a $250,000 bond at the coupon rate of 2 percent payable semi-annually. Now, the bond has a remaining life of 4 years. i. Two years from now, you bought the ABC bond when the market interest rate for a new ABC bond is 4 percent. How much did you pay for the bond? ii. You sold the bond purchased in part i. after holding it for a year, when interest rates (for bonds of similar risk as ABC's bonds) fell to 3 percent. What is the percentage gain / loss on the bond? Illustrate your answer using the bond valuation equation.
Last year, Sally purchased a $1,000 face value corporate bond with an 11.2 percent annual coupon rate and a 12-year maturity. At the time of the purchase, it had an expected yield to maturity of 11.9 percent. If Sally sold the bond today for $949.88, what rate of return would she have earned for the past year? a. 11.02% b. 11.20% c. 11.10% d. –0.69% e. 10.51%
A zero-coupon bond pays no interest during its lifetime. Upon maturity, the investor receives face value. The purchase price determines the rate of return. (a) Henri paid $10,750 for a $20,000 face value zero-coupon bond that matures in 10 years. Find the annual compound rate of interest received. (Round your answer to two decimal places.) % (b) Sandi plans to purchase a zero-coupon bond with a face value of $10,000 and matures in 7 years. She wants to earn 7.1% compounded annually. Find the price. she should pay. (Round your answer to two decimal places.) Additional Materials
Five years ago, John bought the ABC $1,000 9% 15-year bond. The bond could be called four years from today, at $1090. If the bond is called six years from today, it will be called at $1,080. Currently, the bonds are selling for $1,065. If John buys the bond today, and the bonds are called 4 years from today, what is John’s yield to call? If the bonds are not called at all, what is the Yield to Maturity? Only typing answer Please answer explaining in detail step by step without table and graph thankyou
Jenna bought a bond that was issued by Sherlock Watson Industries (SWI) three years ago. The bond has a $1,000 maturity value, a coupon rate equal to 9%, a market rate (yield to maturity) of 10%, and it matures in 17 years. Interest is paid every six months; the next interest payment is scheduled six months from today.
Sara owns one bond A and one bond B. The total value of these two bonds is $1,860.00. Bond A pays semi-annual coupons, matures in 12 years, has a face value of $1,000.00, and pays its next coupon in 6 months. Bond B pays annual coupons, matures in 3 years, has a face value of $1,000.00, has a yield-to- maturity of 10.64 percent, and pays its next coupon in one year. Both bonds have a coupon rate of 9.30 percent. What is the yield-to-maturity for bond A? O 10.54% (plus or minus 2 bps) O 10.92% (plus or minus 2 bps) O 5.92% (plus or minus 2 bps) O 8.87% (plus or minus 2 bps) O none of the answers are within 2 bps of the correct answer

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