a. Many years ago, Castles in the Sand Incorporated issued bonds at face value at a yield to maturity of 5.6 %. Now, with 5 years left until the maturity of the bonds, the company has run into hard times and the yield to maturity on the bonds has increased to 13% What is now the price of the bond? (Assume semiannual coupon payments.) Note: Do not round intermediate calculations. Round your answer to 2 decimal places. Bond price 734.01 b. Suppose that investors believe that Castles can make good on the promised coupon payments but that the company will go bankrupt when the bond matures and the principal comes due. The expectation is that investors will receive only 82% of face value at maturity. If they buy the bond today, what yield to maturity do they expect to receive? Note: Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. Yield to maturity %

a. Many years ago, Castles in the Sand Incorporated issued bonds at face value at a yield to maturity of 5.6 %. Now, with 5 years left until the maturity of the bonds, the company has run into hard times and the yield to maturity on the bonds has increased to 13% What is now the price of the bond? (Assume semiannual coupon payments.) Note: Do not round intermediate calculations. Round your answer to 2 decimal places. Bond price 734.01 b. Suppose that investors believe that Castles can make good on the promised coupon payments but that the company will go bankrupt when the bond matures and the principal comes due. The expectation is that investors will receive only 82% of face value at maturity. If they buy the bond today, what yield to maturity do they expect to receive? Note: Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. Yield to maturity %

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. Many years ago, Castles in the Sand Incorporated issued bonds at face value at a yield to maturity of 8.6%. Now, with 7 years left until the maturity of the bonds, the company has run into hard times and the yield to maturity on the bonds has increased to 15%. What is now the price of the bond? (Assume semiannual coupon payments.) Note: Do not round intermediate calculations. Round your answer to 2 decimal places. Bond price b. Suppose that investors believe that Castles can make good on the promised coupon payments but that the company will go bankrupt when the bond matures and the principal comes due. The expectation is that investors will receive only 80% of face value at maturity. If they buy the bond today, what yield to maturity do they expect to receive? Note: Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. Yield to maturity %
You are analyzing the cost of debt for a firm. You know that the firm's 14-year maturity, 8.6 percent coupon bonds are selling at a price of $832.00. The bonds pay interest semiannually. If these bonds are the only debt outstanding, answer the following questions. Problem 13.17 a1-a2(a1) Your answer is incorrect. What is the current YTM of the bonds? (Round intermediate calculations to 4 decimal places, e.g. 1.2514 and final answer to O decimal places, e.g. 15%.) Current YTM for the bonds %
a. Several years ago, Castles in the Sand Inc. issued bonds at face value of $1,000 at a yield to maturity of 5.2%. Now, with 5 years left until the maturity of the bonds, the company has run into hard times and the yield to maturity on the bonds has increased to 11%. What is the price of the bond now? (Assume semiannual coupon payments.) (Do not round intermediate calculations. Round your answer to 2 decimal places.) b. Suppose that investors believe that Castles can make good on the promised coupon payments but that the company will go bankrupt when the bond matures and the principal comes due. The expectation is that investors will receive only 80% of face value at maturity. If they buy the bond today, what yield to maturity do they expect to receive? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)
a. Many years ago, Castles in the Sand Incorporated issued bonds at face value at a yield to maturity of 8.8%. Now, with 7 years left until the maturity of the bonds, the company has run into hard times and the yield to maturity on the bonds has increased to 14% What is now the price of the bond? (Assume semiannual coupon payments.) Note: Do not round intermediate calculations. Round your answer to 2 decimal places. Bond price $ Yield to maturity 777.01 b. Suppose that investors believe that Castles can make good on the promised coupon payments but that the company will go bankrupt when the bond matures and the principal comes due. The expectation is that investors will receive only 86% of face value at maturity. If they buy the bond today, what yield to maturity do they expect to receive? Note: Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. 1%
(a) Many years ago, Castles in the Sand Incorporated issued bonds at face value at a yield to maturity of 6.6%. Now, with 6 years left until the maturity of the bonds, the company has run into hard times and the yield to maturity on the bonds has increased to 13%. What is now the price of the bond? (Assume semiannual coupon payments.) Note: Do not round intermediate calculations. Round your answer to 2 decimal places. (b) Suppose that investors believe that Castles can make good on the promised coupon payments but that the company will go bankrupt when the bond matures and the principal comes due. The expectation is that investors will receive only 86% of face value at maturity. If they buy the bond today, what yield to maturity do they expect to receive? Note: Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal
Many years ago, Castles in the Sand Incorporated issued bonds at face value at a yield to maturity of 7%. Now, with 8 years left until the maturity of the bonds, the company has run into hard times and the yield to maturity on the bonds has increased to 15%. What is now the price of the bond? (Assume semiannual coupon payments.) Note: Do not round intermediate calculations. Round your answer to 2 decimal places. Suppose that investors believe that Castles can make good on the promised coupon payments but that the company will go bankrupt when the bond matures and the principal comes due. The expectation is that investors will receive only 80% of face value at maturity. If they buy the bond today, what yield to maturity do they expect to receive? Note: Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.
Many years ago, Castles in the Sand Incorporated issued bonds at face value at a yield to maturity of 8%. Now, with 8 years left until the maturity of the bonds, the company has run into hard times and the yield to maturity on the bonds has increased to 15%. What is now the price of the bond? (Assume semiannual coupon payments.) Note: Do not round intermediate calculations. Round your answer to 2 decimal places. Suppose that investors believe that Castles can make good on the promised coupon payments but that the company will go bankrupt when the bond matures and the principal comes due. The expectation is that investors will receive only 80% of face value at maturity. If they buy the bond today, what yield to maturity do they expect to receive?
Solve by Formula. Three years ago, ABC Company issued 10-year bonds that pay 5% semiannually. a. If the bond currently sells for $1,045, what is the yield to maturity (YTM) on this bond? b. If you are expecting that the interest rate will drop in the near future and you want to gain profit by speculating on a bond, will you buy or sell this bond? Why?
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
The Clarence Corporation has issued bonds that pay semiannually with the following characteristics: Macaulay Duration 7.30 years a. Calculate modified duration using the information provided. Do not round intermediate calculations. Round your answer to two decimal places. Use only the data provided in the table above (in the problem statement) for your calculations. years Coupon 12% b. What is a better measure when calculating the bond's sensitivity to changes in interest rates? is a better measure of the bond's sensitivity to changes in interest rates as select- -Select- c. Identify the direction of change in modified duration if: 1. the coupon of the bond were 14%, not 12%. Modified duration -Select- as the coupon increases. 2. the maturity of the bond were 9 years, not 15 years. Modified duration -Select- | as maturity decreases. Yield to Maturity Maturity 12% 15 considers only the final cash flow, while -Select- includes other factors.
Langford Co. Issued 14-year bonds a year ago at a coupon rate of 8.8%. The bonds make semiannual payments. If the YTM on these bonds Is 7.1%, what is the current bond price? (Do not round Intermediate calculations. Round the final answer to 2 decimal places. Omit $ sign in your response.) Current bond price
(Related to Checkpoint 9.2) (Yield to maturity) The Saleemi Corporation's $1,000 bonds pay 7 percent interest annually and have 13 years until maturity. You can purchase the bond for $1,105. a. What is the yield to maturity on this bond? b. Should you purchase the bond if the yield to maturity on a comparable-risk bond is 7 percent? a. The yield to maturity on the Saleemi bonds is nothing%. (Round to two decimal places.)

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