On issue date, Eric bought a bond offered with the following details. For simplicity, assume that coupons are tax-free. Issuer Par Value Tenor Coupon Rate Issue Date Maturity Date Coupon Payment every 3 months O 5.15% O 5.25% 16888 Corporation O 5.2% P10,000 O 5.3% 5 years 5.2% p.a. If Eric sells the bond on December 10, 2020 at P10,100, what would be the current yield of the buyer? December 10, 2018 December 10, 2023

On issue date, Eric bought a bond offered with the following details. For simplicity, assume that coupons are tax-free. Issuer Par Value Tenor Coupon Rate Issue Date Maturity Date Coupon Payment every 3 months O 5.15% O 5.25% 16888 Corporation O 5.2% P10,000 O 5.3% 5 years 5.2% p.a. If Eric sells the bond on December 10, 2020 at P10,100, what would be the current yield of the buyer? December 10, 2018 December 10, 2023

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 investor just purchased a 10-year, $1,000 par value bond. The coupon rate on this bond is 5 percent with interest being paid semiannually. If the investor expects to earn an 8 percent rate of return on this bond, how much should she pay for it? A. $950.75 OB.$1,003.42 OC. $875.38 OD. $1,122.87 E.$796.15
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Last year, Kevin Thomas purchased a $1000 Campbell Manufacturing corporate bond with an annual interest rate of 7.25%. The bond's current market price is $770. Calculate the following. If necessary, round all answers to two decimal places. If necessary, refer to the list of financial formulas. 1. Annual interest: 2. Current yield: $0 0% X S
Albert purchased a bond with exactly 20 years to redemption. The bond pays annual coupons, in arrears, of 5% per annum and is redeemed at par. Albert, who is not liable to pay tax, will obtain a gross redemption yield of 6% per annum if he holds the bond utill redemption. (a) Calculate the purchase price Albert paid for the bond, per $100 nominal if his intention was to hold the bond utill redemption. (b) After exactly ten years, immediately after receiving payment of the coupon then due, Albert sells the bond to Vicky who is liable to pay income tax and capital gains tax at a rate of 30%. The bond is purchased by Vicky to provide a net rate of return of 6.5% per annum. (i) Calculate the price Vicky paid for the bond, per $100 nominal. (ii) Using trial-and-error followed by linear interpolation, calculate the annual effective rate of return, correct to 4 decimal places, earned by Albert during the period for which he held the bond.
A $10,000, 10-year corporate bond is offered at a premium for $11,000. The bond rate is 10% 6) per year compounded quarterly. If John wishes to earn 8% per year compounded quarterly on the bond investment, should he purchase the bond assuming he keeps the bond till it matures and then redeems it at face value? Explain. Show all work.
Sally purchased a 5.73 percent coupon bond with a clean price of $1,031.83. What is the invoice price of the bond if there is four months to the next semiannual coupon date? A $1,012.73 B $1,022.28 C$1,041.38 D) $1,050.93 (E $1,089.13
Kevin Rogers is interested in buying a five-year bond that pays a coupon of 8.5 percent on a semiannual basis. The current market rate for similar bonds is 6.9 percent. What should be the current price of this bond? (Do not round intermediate computations. Round your final answer to the nearest dollar.) O $1,067 O $1,099 O $965 O $982
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.
A zero-coupon bond pays no interest during its lifetime. Upon maturity, the investor receives face value. The purchase price determines the rate of return. (a) Henri paid $10,750 for a $20,000 face value zero-coupon bond that matures in 10 years. Find the annual compound rate of interest received. (Round your answer to two decimal places.) % (b) Sandi plans to purchase a zero-coupon bond with a face value of $10,000 and matures in 7 years. She wants to earn 7.1% compounded annually. Find the price. she should pay. (Round your answer to two decimal places.) Additional Materials
Jay purchased a Treasury bond with a coupon rate of 4.49% and face value of $100. The maturity date of the bond is 15 March 2029. (b) In fact, Yuri changes his plan and Jay plans to sell this bond on 7 January 2022. What was Jay's sale price (rounded to four decimal places)? Assume a yield of 3.02% p.a. compounded half - yearly. Question Answer a. 111.6359 b 110.8412 c. 109.1924 d .108.7396
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Jay purchased a Treasury bond with a coupon rate of 4.49% and face value of $100. The maturity date of the bond is 15 March 2029. (b) In fact, Yuri changes his plan and Jay plans to sell this bond on 7 January 2022. What was Jay's sale price (rounded to four decimal places)? Assume a yield of 3.02% p.a. compounded half - yearly. Question Answer a. 111.6359 b 110.8412 c. 109.1924 d .108.7396

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