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Q) An $6,000 face-
How much should the investor pay for the bond?
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- Which of the following statements is true? You intend to purchase a 10-year, $1,000 face value bond that pays interest of $60 every 6 months. If your nominal annual required rate of return is 10 percent with semiannual compounding, how much should you be willing to pay for this bond? Select one:A $5,000 face value strip bond has 12 years remaining until maturity. If the market rate of return is 4.00% compounded semiannually, what is the fair market value of the bond? Your Answer: Answerthe following features: • Coupon rate of interest (paid annually): 10 percent • Principal: $1,000 • Term to maturity: 8 years a. What will the holder receive when the bond matures? |-Select- b. If the current rate of interest on comparable debt is 7 percent, what should be the price of this bond? Assume that the bond pays interest annually. Use Appendix B and Appendix D to answer the question. Round your answer to the nearest dollar. Would you expect the firm to call this bond? Why? -Select- v, since the bond is selling for a-Select- v. c. If the bond has a sinking fund that requires the firm to set aside annually with a trustee sufficient funds to retire the entire issue at maturity, how much must the firm remit each year for eight years if the funds earn 7 percent annually and there is $80 million outstanding? Use Appendix C to answer the question. Round your answer to the nearest dollar.
- You buy a bond that pays annual interest payments of 7% of the bond’s face value of $1000. You initially pay $950 for the bond. You receive an annual interest payment after one year, then sell the bond for $880. What is your total rate of return on the investment, expressed as a percentage of the purchase price?(Bond valuation) You own a 10-year, $1,000 par value bond paying 8 percent interest annually. The market price of the bond is $825, and your required rate of return is 12 percent. a. Compute the bond's expected rate of return. b. Determine the value of the bond to you, given your required rate of return. c. Should you sell the bond or continue to own it? ... a. What is the expected rate of return of the 10-year, $1,000 par value bond paying 8 percent interest annually if its market price is $825? % (Round to two decimal places.)How much will a $49,200 EE savings bond cost when you initially purchase it? Assuming the bond earns 2.69 percent annually, approximately how long will it take for the bond to reach its stated face value? When you initially purchase it, the EE saving bond will cost $ 24,600. (Round to the nearest dollar.) Assuming the bond earns 2.69 percent annually, the length of time it will take for the bond to reach its stated face value is years. (Round to one decimal place.)
- Consider a bond with a face value of $1,000. The coupon is paid semiannually and the marketinterest rate (effective annual interest rate) is 8 percent. How much would you pay for the bondif a. the coupon rate is 6 percent and the remaining time to maturity is 10 years?b. the coupon rate is 10 percent and the remaining time to maturity is 15 years?Find the price a purchaser should be willing to pay for the given bond. Assume that the coupon interest is paid twice a year. $19,000 bond with coupon rate 6% that matures in 4 years; current interest rate is 5% The purchaser should be willing to pay $ (Simplify your answer. Round to the nearest cent as needed.)Consider a bond with a face value of $1,000. The coupon is paid semiannually and the market interest rate (effective annual interest rate) is 8 percent. How much would you pay for the bond if a. the coupon rate is 6 percent and the remaining time to maturity is 10 years?
- (i) If investors have demanded an interest rate of 5 percent on the bond investment, what is the maximum prices to pay for the 1-year bond and 30-year bond? (ii) Suppose that the interest rate has increased to 20%, calculate the values of the 1-yearbond and 30-year bond.(iii) Based on the calculations in parts (b) (i) and (ii) above, explain with reasons thefundamental relationship between interest rates and bond maturity. (iv) Briefly explain the meaning of the terms “bond’s coupon rate”, “current yield”, and“yield to maturity”. (v) Explain why bonds have protective covenants.You are considering the purchase of a perpetual bond that pays you $174 per year for the foreseeable future. If you require a 5.85% rate of return on this bond investment, what is a fair price for the bond that you would be willing to pay today? To nearest $0.01You purchase a 6% $1,000 bond with a term of 5 years and reinvest all interest payments. If interest rates rise to 9% after you purchase the bond, what is the return on your investment in the bond? Assume annual payments/compounding. 6.33% 6.69% 9.00% 6.45%