(b) Mr Jamal Abdollah plan to buy either one of this two bonds below. The information for both bonds are shown as follows: Bond Selling price Coupon rate Maturity years Yield to maturity (YTM) Payment Par value BULAN i. Value of bond RM980 8 percent 25 years 12 percent Semi-annually RM1,000 BINTANG RM1200 10 percent 30 years 15 percent Annually RM1,100 Based on the information given, calculate the following both bonds: ii. Yield to call (YTC) if both bonds were redeemed at a price of RM1,000 for Bulan and RM1,500 for Bintang respectively after 10 years. N

(b) Mr Jamal Abdollah plan to buy either one of this two bonds below. The information for both bonds are shown as follows: Bond Selling price Coupon rate Maturity years Yield to maturity (YTM) Payment Par value BULAN i. Value of bond RM980 8 percent 25 years 12 percent Semi-annually RM1,000 BINTANG RM1200 10 percent 30 years 15 percent Annually RM1,100 Based on the information given, calculate the following both bonds: ii. Yield to call (YTC) if both bonds were redeemed at a price of RM1,000 for Bulan and RM1,500 for Bintang respectively after 10 years. N

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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Similar questions

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Calculate the purchase price of the $1,000 face value bond using the information given below. (Do not round the intermediate calculations. Round your final answer to 2 decimal places.) Issue date Dec 15, 2013 Maturity date Dec 15, 2043 Purchase date June 15, 2023 Coupon rate (%) Market rate (%) 5.00 6.4 Assume that • Bond interest is paid semiannually. . The bond was originally issued at its face value. Bonds are redeemed at their face value at maturity. • Market rates of return are compounded semiannually. Bond price
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Harold Reese must choose between two bonds: Bond X pays $85 annual interest and has a market value of $780. It has 12 years to maturity.Bond Z pays $95 annual interest and has a market value of $800. It has five years to maturity. Assume the par value of the bonds is $1,000. a. Compute the current yield on both bonds. (Do not round intermediate calculations. Input your answers as a percent rounded to 2 decimal places.) b. Which bond should he select based on your answers to part a? multiple choice 1 Bond Z Bond X c. A drawback of current yield is that it does not consider the total life of the bond. For example, the approximate yield to maturity on Bond X is 11.90 percent. What is the approximate yield to maturity on Bond Z? The exact yield to maturity? (Use the approximation formula to compute the approximate yield to maturity and use the calculator method to compute the exact yield to maturity. Do not round intermediate calculations. Input your answers as a…
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Assume that you have two bond investments and the information follows: Bond A has a par value of $8,000, interest paid semi annual, maturity 2 years, stated interest rate is 6%. Bond B has a par value of $8,000, interest paid semi annual, maturity 10 years, stated interest rate is 6%. The interest rates are increasing to 7%. Assume that you can only sell one of the bonds, which bond will you sell before the interest rate changes to 7%? Explain and support your answer with a present value calculation.

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