Suppose a five-year face value of $1000 bond with a 9% coupon rate, and coupons are paid semi-annually. The yield to maturity of this bond is 7% (APR with semi-annual compounding). a) Is this bond trading at a discount, at par, or a premium? Explain. b) If the bond's yield to maturity rises to 8% (APR with semi-annual compounding), what price will the bond trade for?
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Suppose a five-year face
a) Is this bond trading at a discount, at par, or a premium? Explain.
b) If the bond's yield to maturity rises to 8% (APR with semi-annual compounding), what price will the bond trade for?
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Solved in 3 steps
- What would be the value of the bond described in Part d if, just after it had been issued, the expected inflation rate rose by 3 percentage points, causing investors to require a 13% return? Would we now have a discount or a premium bond? What would happen to the bond’s value if inflation fell and rd declined to 7%? Would we now have a premium or a discount bond? What would happen to the value of the 10-year bond over time if the required rate of return remained at 13%? If it remained at 7%? (Hint: With a financial calculator, enter PMT, I/YR, FV, and N, and then change N to see what happens to the PV as the bond approaches maturity.)Bond Yields and Rates of Return A 10-year, 12% semiannual coupon bond with a par value of 1,000 may be called in 4 years at a call price of 1,060. The bond sells for 1,100. (Assume that the bond has just been issued.) a. What is the bonds yield to maturity? b. What is the bonds current yield? c. What is the bonds capital gain or loss yield? d. What is the bonds yield to call?Suppose a 10-year, $1,000 bond with an 8.0% coupon rate and semi-annual coupons is trading for a price of $1,034.74. a. What is the bond's yield to maturity (expressed as an APR with semi-annual compounding)? b. If the bond's yield to maturity changes to 9.0% APR, what will the bond's price be? a. What is the bond's yield to maturity (expressed as an APR with semi-annual compounding)? The bond's yield to maturity is %. (Round to two decimal places.)
- Suppose a ten-year, $1,000 bond with an 8.8% coupon rate and semiannual coupons is trading for $1,034.64. a. What is the bond's yield to maturity (expressed as an APR with semiannual compounding)? b. If the bond's yield to maturity changes to 9.3% APR, what will be the bond's price? a. What is the bond's yield to maturity (expressed as an APR with semiannual compounding)? The bond's yield to maturity is %. (Round to two decimal places.)Suppose a ten-year, $1,000 bond with an 8.3% coupon rate and semiannual coupons is trading for $1,035.03. a. What is the bond's yield to maturity (expressed as an APR with semiannual compounding)? b. If the bond's yield to maturity changes to 9.6% APR, what will be the bond's price? a. What is the bond's yield to maturity (expressed as an APR with semiannual compounding)? The bond's yield to maturity is ☐ %. (Round to two decimal places.)Suppose a 10-year, $1,000 bond with a 8% coupon rate and semiannual coupons is trading for a price of $1,037.12. a. What is the bond's yield to maturity (expressed as an APR with semiannual compounding)? b. If the bond's yield to maturity changes to 9% APR, what will the bond's price be?
- Suppose a ten-year, $1,000 bond with an 8.9% coupon rate and semiannual coupons is trading for $1,034.24. a. What is the bond's yield to maturity (expressed as an APR with semiannual compounding)? b. If the bond's yield to maturity changes to 9.2% APR, what will be the bond's price? a. What is the bond's yield to maturity (expressed as an APR with semiannual compounding)? The bond's yield to maturity is 8.39 %. (Round to two decimal places.) b. If the bond's yield to maturity changes to 9.2% APR, what will be the bond's price? The new price for the bond is $ (Round to the nearest cent.)Suppose a ten-year, $1,000 bond with an 8.2% coupon rate and semiannual coupons is trading for $1,034.64. a. What is the bond's yield to maturity (expressed as an APR with semiannual compounding)? b. If the bond's yield to maturity changes to 9.4% APR, what will be the bond's price?Suppose a ten-year, $1,000 bond with an 8.8% coupon rate and semiannual coupons is trading for $1,034.29. a. What is the bond's yield to maturity (expressed as an APR with semiannual compounding)? b. If the bond's yield to maturity changes to 9.2% APR, what will be the bond's price?
- Suppose a seven-year, $1,000 bond with a coupon rate of 8.1% and semiannual coupons is trading with a yield to maturity of 6.27%. a. Is this bond currently trading at a discount, at par, or at a premium? Explain. b. If the yield to maturity of the bond rises to 7.28% (APR with semiannual compounding), what price will the bond trade for?Suppose a 10-year, $1,000 bond with an 8.4% coupon rate and semi-annual coupons is trading for a price of $1,035.09. a. What is the bond's yield to maturity (expressed as an APR with semi-annual compounding)? b. If the bond's yield to maturity changes to 9.8% APR, what will the bond's price be? a. What is the bond's yield to maturity (expressed as an APR with semi-annual compounding)? The bond's yield to maturity is 7.88 %. (Round to two decimal places.) b. If the bond's yield to maturity changes to 9.8% APR, what will the bond's price be? The new price for the bond will be $ (Round to the nearest cent.)Suppose a seven-year, $1,000 bond with a coupon rate of 7.8% and semiannual coupons is trading with a yield to maturity of 6.34%. a. Is this bond currently trading at a discount, at par, or at a premium? Explain. b. If the yield to maturity of the bond rises to 7.34% (APR with semiannual compounding), what price will the bond trade for? a. Is this bond currently trading at a discount, at par, or at a premium? Explain. (Select the best choice below.) OA. Because the yield to maturity is greater than the coupon rate, the bond is trading at a premium. O B. OC. Because the yield to maturity is less than the coupon rate, the bond is trading at a discount. Because the yield to maturity is greater than the coupon rate, the bond is trading at par. O D. Because the yield to maturity is less than the coupon rate, the bond is trading at a premium.
