A $1,000 par value bond was issued five years ago at a 8 percent coupon rate. It currently has 25 years remaining to maturity. Interest rates on similar debt obligations are now 10 percent. Use Appendix B and Appendix D for an approximate answer but calculate your final answer using the formula and financial calculator methods. a. Compute the current price of the bond using an assumption of semiannual payments. Note: Do not round intermediate calculations and round your answer to 2 decimal places. Current bond price b. If Mr. Robinson initially bought the bond at par value, what is his percentage capital gain or loss? Note: Ignore any interest income received. Do not round intermediate calculations and round your answer to 2 decimal places. Percentage loss %

A $1,000 par value bond was issued five years ago at a 8 percent coupon rate. It currently has 25 years remaining to maturity. Interest rates on similar debt obligations are now 10 percent. Use Appendix B and Appendix D for an approximate answer but calculate your final answer using the formula and financial calculator methods. a. Compute the current price of the bond using an assumption of semiannual payments. Note: Do not round intermediate calculations and round your answer to 2 decimal places. Current bond price b. If Mr. Robinson initially bought the bond at par value, what is his percentage capital gain or loss? Note: Ignore any interest income received. Do not round intermediate calculations and round your answer to 2 decimal places. Percentage loss %

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 $1,000 par value bond was issued five years ago at a 10 percent coupon rate. It currently has 8 years remaining to maturity. Interest rates on similar debt obligations are now 12 percent. Use Appendix B and Appendix D for an approximate answer but calculate your final answer using the formula and financial calculator methods. a. Compute the current price of the bond using an assumption of semiannual payments. (Do not round intermediate calculations and round your answer to 2 decimal places.) b. If Mr. Robinson initially bought the bond at par value, what is his percentage capital gain or loss? (Ignore any interest income received. Do not round intermediate calculations and input the amount as a positive percent rounded to 2 decimal places.) c. Now assume Mrs. Pinson buys the bond at its current market value and holds it to maturity, what will be her percentage capital gain or loss? (Ignore any interest income received. Do not round intermediate calculations and input…
Suppose that the prices of zero-coupon bonds with various maturities are given in the following table. The face value of each bond is $1,000. Maturity (Years) 1 2 3 4 5 Show Transcribed Text B) How could you construct a 1-year forward loan beginning in year 3? (Face Value) C) How could you construct a 1-year forward loan beginning in year 4? (Face Value) Required A Required B Complete this question by entering your answers in the tabs below. Face value Rate of synthetic loan → Show Transcribed Text Price $ 970.93 898.39 836.92 How could you construct a 1-year forward loan beginning in year 3? Note: Round your Rate of synthetic loan answer to 2 decimal places. Required A 776.20 685.42 Required B Face value Rate of synthetic loan Required C 7.85 % Required C How could you construct a 1-year forward loan beginning in year 4? Note: Round your Rate of synthetic loan answer to 2 decimal places. Ċ 13.29 %
A $1,000 par value bond was issued five years ago at a 10 percent coupon rate. It currently has 25 years remaining to maturity. Interest rates on similar debt obligations are now 12 percent. Use Appendix B and Appendix D for an approximate answer but calculate your final answer using the formula and financial calculator methods. a. Compute the current price of the bond using an assumption of semiannual payments. (Do not round intermediate calculations and round your answer to 2 decimal places.) b. If Mr. Robinson initially bought the bond at par value, what is his percentage capital gain or loss? (Ignore any interest income received. Do not round intermediate calculations and input the amount as a positive percent rounded to 2 decimal places.)
Suppose that the prices of zero-coupon bonds with various maturities are given in the following table. The face value of each bond is $1,000. Maturity (Years) Price 1 $ 998.78 2 880.89 3 815.92 4 752.40 5 685.70 a. Calculate the forward rate of interest for each year. (Round your answers to 2 decimal places.) b. How could you construct a 1-year forward loan beginning in year 3? (Round your Rate of synthetic loan answer to 2 decimal places.) c. How could you construct a 1-year forward loan beginning in year 4? (Round your answers to 2 decimal places.)
Assuming that the expectations hypothesis is valid, compute the expected price path of the 4-year bond ($1,000 face value) using the data given below as time passes. What is the rate of return of the bond in each year? (Do not round intermediate calculations. Round your dollar answers to 2 decimal places. Omit the "% & $" sign in your response.) Maturity (years) 1 2 3 4 A Beginning of Year 1 2 3 4 Price of Bond $943.40 898.47 847.62 792.16 Expected Price $ tA $ ta ta $ $ Expected Rate of Return % % % %
A Treasury bond that settles on October 18, 2022, matures on March 30, 2041. The coupon rate is 6.10 percent, and the bond has a yield to maturity of 5.57 percent. What are the Macaulay duration and modified duration? Note: Use the duration functions in Excel to solve the problem. Do not round intermediate calculations. Round your answers to 4 decimal places. Answer is complete but not entirely correct. Macaulay duration 11.4179 Modified duration 10.8154 X
Suppose that the prices of zero-coupon bonds with various maturities are given in the following table. The face value of each bond is $1,000. Maturity (Years) 1 2 3 4 5 Required: a. Calculate the forward rate of interest for each year. b. How could you construct a 1-year forward loan beginning in year 3? c. How could you construct a 1-year forward loan beginning in year 4? Required A Price $940.93 Complete this question by entering your answers in the tabs below. 868.39 800.92 735.40 670.48 Required B Maturity (years) 2 3 Calculate the forward rate of interest for each year. Note: Round your answers to 2 decimal places. Required C Forward Rate % % Prov 12 of 12 Next
Suppose that the prices of zero-coupon bonds with various maturities are given in the following table. The face value of each bond is $1,000. Maturity (Years) 1 2 3 4 5 Price $983.78 865.89 797.92 732.00 660.24 Required: a. Calculate the forward rate of interest for each year. b. How could you construct a 1-year forward loan beginning in year 3? c. How could you construct a 1-year forward loan beginning in year 4?
Consider a bond that has just paid a semi-annual coupon and has exactly 2.5 years to maturity and an annual coupon rate of 3.5%. Price the bond with a yield 4.2%. This is an annuity calculation and the stated yield and stated coupon are double the semi-annual yield and coupon. Use Table 6.1. (Do not round Intermediate calculations. Round the final answer to 2 decimal places. Omit $ sign In your response.) Price of the bond $
A Treasury bond that settles on October 18, 2019, matures on March 30, 2038. The coupon rate is 5.45 percent, and the bond has a yield to maturity of 4.66 percent. What are the Macaulay duration and modified duration? (Use the duration functions in Excel to solve the problem. Do not round intermediate calculations. Round your answers to 4 decimal places.) X Answer is complete but not entirely correct. Macaulay duration Modified duration 12.0670 11.5297
Compute the price of a 5.0 percent coupon bond with 10 years left to maturity and a market interest rate of 7.8 percent. (Assume interest payments are semiannual.) (Do not round intermediate calculations. Round your final answer to 2 decimal places.) I this a discount bond or premium bond
Compute the price of a 5.9 percent coupon bond with 15 years left to maturity and a market interest rate of 9.6 percent. (Assume interest payments are semiannual.) (Do not round intermediate calculations. Round your final answer to 2 decimal places.) Is this a discount or premium bond? premium bond discount bond

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