Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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Transcribed Image Text:explain your process.
1. Suppose today a 10 percent coupon bond sells at par. Two years from now, the required return
on the same bond is 8 percent. What is the coupon rate on the bond? What is the YTM on the
bond?
2. Vinya Inc. has 7.5 percent coupon bonds on the market that have 10 years left to maturity. The
bonds make annual payments. If the YTM on these bonds is 8.75 percent, what is the current
bond price? Assume the par value of a bond is $1,000. Do not round intermediate calculations
and round your final answer to 2 decimal places.
3. Popie Drink Corp issued 12 year bonds 2 years ago at a coupon rate of 8.4 percent. The bonds
make semi-annual payments. If these bonds currently sell for 105 percent of par value, what is
the YTM? Assume the par value of a bond is $1,000. Do not round intermediate calculations
and round your final answer to 2 decimal places.
4. Treasury bills are currently paying 7 percent and the inflation rate is 3.8 percent. What is the
approximate real rate of interest? What is the exact real rate? Round your answer to 2 decimal
places.
5. An investment offers a 14 percent total return over the coming year. Tom Jones thinks the total
real return on the investment will be only 9 percent. What does Tom believe the inflation rate
will be over the next year? Do not round intermediate calculations and round your final answer
to 2 decimal places.
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- 5. A 5-year bond with a yield of 7% (continuously compounded) pays an 8% coupon at the end of each year. What is the bond's price? What is the bond's duration? Use the duration to calculate the effect on the bond's price of a 0.2% decrease in its yield.arrow_forwardA 6.25 percent coupon bond with 15 years left to maturity is priced to offer a yield to maturity of 7.5 percent. You believe that in one year, the yield to maturity will be 7.0 percent. Assuming semiannual interest payments, what is the change in price the bond will experience in dollars? (Do not round intermediate calculations. Round your final answer to 2 decimal places.)arrow_forwardyou are considering the purchase of a semiannual bond with a 9% coupon rate, it is trading at $875 and matures at $ 1000 in 25 years. What is the coupon payment on this bond?.arrow_forward
- A 7.7% coupon bearing bond pays interest semi-annually and has a maturity of 3 years. If the annual yield to maturity is 5.9%, what is the current price of this bond?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_forwardA 6.05 percent coupon bond with 18 years left to maturity can be called in six years. The call premium is one year of coupon payments. It is offered for sale at $1,085.50. What is the yield to call of the bond? (Assume interest payments are semiannual.) (Round your answer to 2 decimal places.)arrow_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_forwardA 7.0 percent coupon bond with 25 years left to maturity can be called in four years. The call premium is one year of coupon payments. It is offered for sale at $1,066. What is the yield to call of the bond? (Assume that interest payments are paid annually and par value is $1,000.)arrow_forward
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