Suppose a seven-year, $1,000 bond with a 7.7% coupon rate and semiannual coupons is trading with a yield to maturity of 6.51%. 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 7.38% (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 less than the coupon rate, the bond is trading at a premium. O B. Because the yield to maturity is greater than the coupon rate, the bond is trading at a premium. OC. Because the yield to maturity is less than the coupon rate, the bond is trading at a discount. OD. Because the yield to maturity is greater than the coupon rate, the bond is trading at par.

Suppose a seven-year, $1,000 bond with a 7.7% coupon rate and semiannual coupons is trading with a yield to maturity of 6.51%. 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 7.38% (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 less than the coupon rate, the bond is trading at a premium. O B. Because the yield to maturity is greater than the coupon rate, the bond is trading at a premium. OC. Because the yield to maturity is less than the coupon rate, the bond is trading at a discount. OD. Because the yield to maturity is greater than the coupon rate, the bond is trading at par.

Pfin (with Mindtap, 1 Term Printed Access Card) (mindtap Course List)

7th Edition

ISBN:9780357033609

Author:Randall Billingsley, Lawrence J. Gitman, Michael D. Joehnk

Publisher:Randall Billingsley, Lawrence J. Gitman, Michael D. Joehnk

Chapter12: Investing In Stocks And Bonds

Section: Chapter Questions

Problem 8FPE: Describe and differentiate between a bonds (a) current yield and (b) yield to maturity. Why are...

See similar textbooks

Similar questions

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 seven-year, $1,000 bond with a 5.98% coupon rate and semiannual coupons is trading with a yield to maturity of 4.01%. a. Is this bond currently trading at a discount, at par, or at a premuim? Explain. b. If the yield to maturity of the bond rises to 4.37% (APR with semiannual compounding), at what price will the bond trade?
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?
Consider a $1,000-par-value Bond with the following characteristics: a current market price of $761, 12 years until maturity, and an 8% coupon rate. We want to determine the discount rate that sets the present value of the bond’s expected future cash-flow stream to the bond’s current market price. You are required to determine the discount rate that equates the present value of the bond?
Suppose a ten-year, $1,000 bond with an 8.3% coupon rate and semiannual coupons is trading for $1,035.77. 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 9.8% APR, what will be the bond's price?
Suppose a seven-year, $1,000 bond with a 11.53% coupon rate and semiannual coupons is trading with a yield to maturity of 9.06%. Is this bond currently trading at a discount, at par, or at a premuim? Explain. The bond is currently trading... (Select the best choice below.) A.... at a discount because the coupon rate is greater than the yield to maturity B.... at a premium because the yield to maturity is greater than the coupon rate C.... at par because the coupon rate is equal to the yield to maturity D.... at a premium because the coupon rate is greater than the yield to maturity 2. If the yield to maturity of the bond rises to 9.85% (APR with semiannual compounding), at what price will the bond trade?
What is the yield to maturity on a 10-year, 9%annual coupon, $1,000 par value bond that sellsfor $887.00? That sells for $1,134.20? What does the fact that a bond sells at a discount orat a premium tell you about the relationshipbetween rdand the bond’s coupon rate?
Assume the zero-coupon yields on default-free securities are as summarized in the following table: Maturity(Years) 1 2 3 4 5 YTM for this bond 6.20% 6.80% 7.00% 7.30% 7.60% What is the price of a three-year, default-free security with a face value of $1,000 and an annual coupon rate of 7%? What is the yield to maturity for this bond?
Suppose a 10-year, $1,000 bond with a 10% coupon rate and semiannual coupons is trading for a price of $957.81. 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 8% APR, what will the bond's price be? a. What is the bond's yield to maturity (expressed as an APR with semiannual compounding)? The YTM is _____________(Round to two decimal places.) b. If the bond's yield to maturity changes to 8% APR, what will the bond's price be? The price is $______________ (Round to the nearest cent.)
Consider a bond that has a current value of $1,081.11, a face value of $1,000.00, a coupon rate of 10% and five years remaining to maturity.a. What is the bond’s yield-to-maturity today?b. If the bond’s yield does not change, what is its value one year from today? Please solve both parts
If a bond's yield to maturity does not change, the return on the bond each year will be equal to the yield to maturity. Confirm this for both a premium and a discount bond using a 4-year 3 percent coupon bond with annual coupon payments and a face value of $1,000. Bond a. Assume the yield to maturity is 2 percent, what is the bond price today, what is the bond price in one year, and what is the rate of return? Bond b. Assume the yield to maturity is 4 percent, what is the bond price today, what is the bond price in one year, and what is t
Suppose a 10-year, $1000 bond with a coupon rate of 8.4% and semiannual coupons is trading for $1035.64. 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?