Question 7 Mr Conner calls his broker to inquire about purchasing a bond of Tesla Corporation. broker quotes a price of $1,100. Mr Conner is concerned that the bond might overpriced based on the facts involved. The $ 1,000 par value bond pays 11 per interest, and it has 14 years remaining until maturity. The required rate of return on bond is 9 percent. Do you think the bond is overpriced? Show all the relevant working

Question 7 Mr Conner calls his broker to inquire about purchasing a bond of Tesla Corporation. broker quotes a price of $1,100. Mr Conner is concerned that the bond might overpriced based on the facts involved. The $ 1,000 par value bond pays 11 per interest, and it has 14 years remaining until maturity. The required rate of return on bond is 9 percent. Do you think the bond is overpriced? Show all the relevant working

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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7. Suppose you are deciding whether or not to buy a particular bond for $2,990.08. If you buy the bond and hold it for 5 years, then at that time you will receive a payment of $5,000. You will buy the bond today if the interest rate is a. no less than 9.48 percent. b. no greater than 9.48 percent. c. no less than 10.83 percent. d. no greater than 10.83 percent.
5. You are a fixed income trader at Goldman Sachs. You purchase $1,000,000 in face value of a bond with a price of 102.50 and accrued interest (per 100 face) of 0.75 from a customer. The bond has a modified duration of 3.75. Goldman owns $25,000,000 in face value of the most recently issued 5 year Treasury note on its balance sheet. It has a modified duration of 4.5, a price of 101.75 and accrued interest (per 100 face) of 0.30. Calculate the amount of face value of that Treasury security you need to sell to hedge the interest rate risk of the bond you just purchased. Round to the nearest thousand since bond trade in 1000 face value increments. $1,000,000 $843,000 $833,000 $1,186,000
Please answer a,b
The Central Bank of The Bahamas offers to sell you a bond for $585.43. No payments will be made until the bond matures 10 years from now, at which time it will be redeemed for $1,000. What interest rate would you earn if you bought this bond for $585.43? What rate would you earn if you could buy the bond for $550? For $600?
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quiz 11
a. b. C. Problem 9.4: R & J, Inc. issues a 10-year $1,000 bond that pays $28.50 semi-annually. The market price for the bond is $975. The market's required yield to maturity on a comparable-risk bond is 6 percent. a. What is the value of the bond to you?. b. What happens to the value if the market's yield to maturity on a comparable-risk bond (i) increases to 8 percent or (ii) decreases to 4 percent? c. Under which of the circumstances in parts a & b should you purchase the bond? Years Par (FV) PMT Nper m Comparable risk (Rate) Bond value (PV) Comparable risk (Rate) Bond value (PV) Comparable risk (Rate) Bond value (PV)
klp.3
1. Suppose that someone wanted to buy a $1,000 face value T-bond that matures in November 2001. How much would it have cost on Black Monday? Answer: S per $1,000 face value
1.ABC Company offers to sell you a bond for $613.91. No payments will be made until the bond matures 10 years from now, at which time it will be redeemed for $1,000. What interest rate would you earn if you bought this bond at the offer price?a. 6.71%b. 5.91%c. 5.59%d. 5.00%2.At a rate of 8%, what is the present value of the following cash flow stream? $0 at now; $100 at the end of Year 1; $300 at the end of Year 2; $0 at the end of Year 3; and $500 at the end of Year 4.a.$ 717.31b.$788.32c. $625.54d. $701.153. ABC company has received a $50,000 loan from a bank. The annual payments are $6,202.70. If the company is paying 9% interest per year, how many loan payments must the company make?a. 12b. 19c. 15d. 134. ABC Company has 100,000 unit of common stock outstanding, its net income is $750,000, and its P/E ratio is 8. What is the company’s stock price?a. $40.00b. $20.00c. $60.00d. $30.005. ABC company 2005 sales were $100 million. If sales grow at 8% per year, how much would it be in…
You have purchased a U.S. Treasury bond for $3,150.00. No payments will be made until the bond matures 10 years from now, at which time it will be redeemed for $5,150. What interest rate will you earn on this bond? Group of answer choices 6.18% 5.04% 3.73% 5.67% 4.46%

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