a. An 8 ½%, 25-year, $1,000 bond is presently selling at a yield-to-maturity (YTM) of 9 4%. Assuming annual interest payments, what should you pay for the bond? b. What should you pay if interest is paid semiannually? c. Instead of a 25-year bond, they decide to issue 15-year bonds with annual payments. What should you pay for this bond if the YTM is 9 4%? Explain the differences in prices changes for (3a) and (3c) in terms of maturity. d. You buy an 8%, 15-year, $1,000 bond that pays interest annually when it is selling with a YTM of 7%. Immediately after you buy the bond, the YTM increases to 9%. What was the percentage change in the price of the bond? A bond has a market price that exceeds its face value. What type of bond is this? Describe the relationship between the coupon rate and the YTM. е.

a. An 8 ½%, 25-year, $1,000 bond is presently selling at a yield-to-maturity (YTM) of 9 4%. Assuming annual interest payments, what should you pay for the bond? b. What should you pay if interest is paid semiannually? c. Instead of a 25-year bond, they decide to issue 15-year bonds with annual payments. What should you pay for this bond if the YTM is 9 4%? Explain the differences in prices changes for (3a) and (3c) in terms of maturity. d. You buy an 8%, 15-year, $1,000 bond that pays interest annually when it is selling with a YTM of 7%. Immediately after you buy the bond, the YTM increases to 9%. What was the percentage change in the price of the bond? A bond has a market price that exceeds its face value. What type of bond is this? Describe the relationship between the coupon rate and the YTM. е.

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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If the market rate of interest is 10%, a $10,000, 12%, 10-year bond that pays interest semiannually would sell at an amount ☐ a. equal to the face value b. greater than face value c. that cannot be determined d. less than face value
2. The quoted price of a bond with a coupon rate of 4.5%, payable semi-annually, maturing on March 1, 2023, is $990. The last coupon payment was made on March 1, 2019. If you buy the bond on July 1, 2019, what is the total price you must pay for the bond?
You have purchased a U.S. Treasury bond for $3,000. No payments will be made until the bond matures 10 years from now, at which time it will be redeemed for $5,000. What interest rate will you earn on this bond? 3.82% 4.25% 4.72% 5.24% 5.77%
A bond matures in 20 years, at which time it pays the owner $1,000. It also pays $70 at the end of each of the next 20 years. If similar bonds are currently yielding 7%, what is the market value of the bond? Select one:cannot be determined from the information givenexactly $1,000under $1,000over $1,000
A few years ago, Zabar Technology issued an annual bond that has a face value equal to $1,000 and pays investors $40 interest semiannually. The bond has four years remaining until maturity. If an investor requires a 5% rate of return to invest in this bond, what is the maximum price he or she should be willing to pay to purchase the bond today? O $1,106.38 O $964.54 O $1,107.55 $935.37
One-year T-bill rates over the next 3 years are expected to be 4%, 5% and 6%. If 3-year T-bonds are yielding 8%, what is the liquidity premium on this bond?
The stated rate is 5%; the market rate is 4%. The future value of Bonds payable is $1,000. When calculating the PV of the bonds what amount would you use as the annuity or annual payment? $40 $10 E $50 $90 $100
A 10%, 25 year bond with a par value of $1,000 pays on an annual basis has a current call feature amounting to 1,300 within 5 years. 1. What is the YTM of the bond if the current price of the bond is $1,100?(Answer with % in two decimal places. Ex. 1.23%) 2. What is the YTC of the bond if the current price of the bond is $1,100?(Answer with % in two decimal places. Ex. 1.23%)
A treasury bill (or bond) promises to pay R1 200 000 to the holder of the bill in a year’s time. Based on this information, which one of the following statements is correct? (a) If the holder pays R1 142 000 for the bill, the return on this treasury bill for a year will be 4.83%; (b) A return of 6% means that the holder will pay R1 135 000 for the treasury bill; (c) A return of 3% would imply a purchase price of R1 173 000; (d) If the holder pays R1 140 000 for the bill, the return for the year will be 5.3%.
If the annual interest rate printed on the face of a bond is 10 percent, the face value of the bond is $1,000, and you purchase the bond for $1,250, what is the current yield on the bond? O A. 5 percent. O B. 6 percent. OC. 12.5 percent. O D.8 percent.
You have purchased a U.S. Treasury bond for $3,150.00. No payments will be made until the bond matures 10 years from now, at which time it will be redeemed for $5,150. What interest rate will you earn on this bond? Group of answer choices 6.18% 5.04% 3.73% 5.67% 4.46%
s

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