Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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A zero coupon with a $1000 face value matures in 10 years. What is the price of the bond today if the effective annual yield-to-maturity is 12.25%?
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- Bond X is noncallable and has 20 years to maturity, an 11% annual coupon, and a $1,000 par value. Your required return on Bond X is 10%; if you buy it, you plan to hold it for 5 years. You (and the market) have expectations that in 5 years, the yield to maturity on a 15-year bond with similar risk will be 10.5%. How much should you be willing to pay for Bond X today? (Hint: You will need to know how much the bond will worth at the end of 5 years.) Do not round Intermediate calculations. Round your answer to the nearest cent. $arrow_forwardAssume that the bond from problem #1 reaches maturity in 5 years instead of 15 years, with the same coupon rate and par value. What would the relevant market prices be at 10%, 5%, and 14% required market rates of return?arrow_forwardA 10-year, 1000 par value bond with a 7% annual coupon is trading to yield 8%. What is the current yield?arrow_forward
- A coupon bond that pays interest semi annually has a par value of $1000, matures in five years and has a YTM of 10%. The intrinsic value of the bond today is? If the coupon rate is 8%? Answer:arrow_forwardWhat is the fair price for a bond with a 5.5% annual coupon and 8 years until maturity if the yield is 9%?arrow_forwardWhat is the value today of zero coupon bond that matures in 21 years and has a par value of $1000 if the required rate of return is 5.87%? Assume annual discountingarrow_forward
- What is the fair price for a bond with a 5.5% annual coupon and 8 years until maturity if the yield is 9%?arrow_forwardThe yield on a 1-year zero-coupon bonds is currently 7%; the YTM on 2 -year zeros is 8%. The treasury plans to issue a 2 -year maturity coupon bond, paying coupons once a year with a coupon rate of 9%. The face value of the bond is $100. (BKM 15.11) a) At what price will the bond sell? 15 p b) If the expectations theory of the yield curve is correct, what is the market expectation of the price that the bond will sell for next year? c) Recalculate your answer to b) if you believe in the liquidity preference theory and you believe the liquidity premium is 1%.arrow_forward
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