Nancy has one share of stock and one bond. The total value of the two securities is $1,091.62. The stock pays annual dividends. The next dividend is expectedto be $16.02 and paid in one year. In two years, the dividend is expected to be $11.57 and the stock is expected to be priced at $210.71. The stock has anexpected return of 12.67 percent per year. The bond has a coupon rate of 6.60 percent and a face value of $1,000; pays semi-annual coupons with the nextcoupon expected in 6 months; and matures in 17.5 years. What is the YTM of the bond?7.62% (plus or minus 4 bps)O 7.73% (plus or minus 4 bps)3.81% (plus or minus 4 bps)8.19% (plus or minus 4 bps)the answer cannot be obtained based on the given information

Answered: Image /qna-images/answer/2ae02526-3e06-4ce3-9dd9-94e39fc3161a.jpg

Answered: Nancy has one share of stock and one…

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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An NickJr bond carries an 8 percent coupon paid annually. The par value is $50,000, and the bond matures in six years. If the bond currently sells for $45,568.50, what is its yield to maturity?
Jenna bought a bond that was issued by Sherlock Watson Industries (SWI) three years ago. The bond has a $1,000 maturity value, a coupon rate equal to 9%, a market rate (yield to maturity) of 10%, and it matures in 17 years. Interest is paid every six months; the next interest payment is scheduled six months from today. If the yield on a similar risk investment is 11%, what is the current market value (price) of the bond? What is the capital gains yield, current yield, and total yield that will be earned if the bond is held until it matures? Assume that the market rate does not change from now until maturity. Suppose that Jenna wants to sell her bond seven years from today when 10 years remain until maturity. If the market rate is 8% at the time she sells the bond in seven years, for what price will Jenna be able to sell the bond? What would be the capital gains yield, current yield, and total yield that the new investor will earn if he/she holds the bond until it matures 10 years…
Assume that Peter purchased a 25-year, 7.24 percent coupon (annual payments) bond at par ($1,000). He sold the bond after 4 years for $1,095.55. He reinvested the coupon payments at the 4.75 percent compounded annually. Calculate the bond's total yield.
Jacob purchased a bond for $880 with a 9% coupon. He sold the bond after one year when it was paying him a current yield of 10%. What is the holding period return? 9.0% 9.5% 10.0% 11.0% 12.5%
Last year Janet purchased a $1,000 face value corporate bond with a 10% annual coupon rate and a 20-year maturity. At the time of the purchase, it had an expected yield to maturity of 10.16%. If Janet sold the bond today for $1,045.92, what rate of return would she have earned for the past year? Do not round intermediate calculations. Round your answer to two decimal places. Please show calculations using calculator.
David Hoffman purchases a $1,000 20-year bond with an 8% coupon (annual payments). Yields on comparable bonds are 10%. Bob expects that two years from now, yields on comparable bonds will have declined to 9%. Find his expected yield, assuming the bond is sold in two years.
Carol plans to invest in a 12 year bond issued by Iris Ltd that pays a coupon of 4.8 percent. Coupon payments are made semi-annually. If the current market rate is 6.4 percent, what is the maximum amount Carol should be willing to pay for this bond? Assume it has a par value of $1000.
Last year Janet purchased a $1,000 face value corporate bond with a 7% annual coupon rate and a 10-year maturity. At the time of the purchase, it had an expected yield to maturity of 8.1%. If Janet sold the bond today for $1,086.18, what rate of return would she have earned for the past year? Do not round intermediate calculations. Round your answer to two decimal places.
Linda is interested in purchasing a corporate bond that was issued with an 8% annual coupon a semiannual interest payment of $40, and maturity in fifteen years. What is the par value of this bond?
(6) Maureen purchased a laddered portfolio of par-value bonds with semiannual coupons for $20,918. The bonds had common face amount X and coupon rate 6.8%. There was one bond redeemable at the end of each year for ten years. Maureen's yield on the portfolio was an annual effective rate of 8%. Find X.
Sara owns one bond A and one bond B. The total value of these two bonds is $1,860.00. Bond A pays semi-annual coupons, matures in 12 years, has a face value of $1,000.00, and pays its next coupon in 6 months. Bond B pays annual coupons, matures in 3 years, has a face value of $1,000.00, has a yield-to- maturity of 10.64 percent, and pays its next coupon in one year. Both bonds have a coupon rate of 9.30 percent. What is the yield-to-maturity for bond A? O 10.54% (plus or minus 2 bps) O 10.92% (plus or minus 2 bps) O 5.92% (plus or minus 2 bps) O 8.87% (plus or minus 2 bps) O none of the answers are within 2 bps of the correct answer
Last year Janet purchased a $1,000 face value corporate bond with a 10% annual coupon rate and a 15-year maturity. At the time of the purchase, it had an expected yield to maturity of 10.34 %. If Janet sold the bond today for $1,164.56, what rate of return would she have earned for the past year? Do not round intermediate calculations. Round your answer to two decimal places. %

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