Katie Pairy Fruits Incorporated has a $2,200 23-year bond outstanding with a nominal yield of 15 percent (coupon equals 15% $2,20 - $330 per year). Assume that the current market required interest rate on similar bonds is now only 12 percent. Use Appendix 8 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. Note: Do not round Intermediate calculations. Round your final answer to 2 decimal places. Assume interest payments are annual. Current price of the bond b. Find the present value of 3 percent $2:200 (or $66) for 23 years at 12 percent. The $66 is assumed to be an annual payment. Add this value to $2,200. Note: Do not round intermediate calculations. Round your final answer to 2 decimal places. Assume interest payments are annual. Present value

Katie Pairy Fruits Incorporated has a $2,200 23-year bond outstanding with a nominal yield of 15 percent (coupon equals 15% $2,20 - $330 per year). Assume that the current market required interest rate on similar bonds is now only 12 percent. Use Appendix 8 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. Note: Do not round Intermediate calculations. Round your final answer to 2 decimal places. Assume interest payments are annual. Current price of the bond b. Find the present value of 3 percent $2:200 (or $66) for 23 years at 12 percent. The $66 is assumed to be an annual payment. Add this value to $2,200. Note: Do not round intermediate calculations. Round your final answer to 2 decimal places. Assume interest payments are annual. Present value

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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Katle Pairy Fruits Incorporated has a $2,400 16-year bond outstanding with a nominal yield of 17 percent (coupon equals 17% × $2,400 = $408 per year). Assume that the current market required interest rate on similar bonds is now only 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. Note: Do not round Intermediate calculations. Round your final answer to 2 decimal places. Assume Interest payments are annual. Current price of the bond b. Find the present value of 5 percent × $2,400 (or $120) for 16 years at 12 percent. The $120 is assumed to be an annual payment. Add this value to $2,400. Note: Do not round Intermediate calculations. Round your final answer to 2 decimal places. Assume Interest payments are annual. Present value
Katie Pairy Fruits Inc. has a $1,300 14-year bond outstanding with a nominal yield of 18 percent (coupon equals 18% × $1,300 = $234 per year). Assume that the current market required interest rate on similar bonds is now only 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. (Do not round intermediate calculations. Round your final answer to 2 decimal places. Assume interest payments are annual.) b. Find the present value of 6 percent × $1,300 (or $78) for 14 years at 12 percent. The $78 is assumed to be an annual payment. Add this value to $1,300. (Do not round intermediate calculations. Round your final answer to 2 decimal places. Assume interest payments are annual.) multiple choice Yes No
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?
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
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The closing price of a U.S. Treasury bond with a face value of $1400 is quoted as 105.45 points, for a current yield of 3.7%. If you buy this bond, how much annual interest will you receive? Make sure your final answer is in a statement form. Show all your math formula/setun math work, and your answer in the space below.
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 $
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Consider a semi-annual bond that has a par value of 100, a 15-year maturity, a 5% coupon rate. Monthly interest rate is 0.412%. (a) What is the price of the bond (without calculation)? And explain why you can determine the price of the bond without calculation? (b) Using answers from (a), calculate the modified duration of this bond. (c) Using answers from (a) and (b), suppose that the bond’s yield to maturity decreases to 3.5%. How much will the bond price increase by applying the duration rule?
Consider a bond that has a price of $1046.76, a coupon rate of 8.8%, a yield to maturity of 8.1%, a face value of $1000, and 10 years to maturity. What is the current yield? Enter your answer as a percentage. Do not include the percentage sign in your answer. Enter your response below. Enter your answer to 2 DECIMAL PLACES. Number %

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