Suppose the face value of a bond which matures in seven years is $5,000, and pays a coupon of $75. Suppose the bond was purchased at a price of $2,000, and the price is estimated to be constant the entire time until maturity. What will be the rate of return on the bond? 40% 4% .0375% 3.75%
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Suppose the face
value of a bond which matures in seven years is $5,000, and pays a coupon of $75. Suppose the bond was purchased at a price of $2,000, and the price is estimated to be constant the entire time until maturity. What will be therate of return on the bond?40%
4%
.0375%
3.75%
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- 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, 10% semiannual coupon bond with a par value of 1,000 is currently selling for 1,135.90, producing a nominal yield to maturity of 8%. However, the bond can be called after 5 years for a price of 1,050. (1) What is the bonds nominal yield to call (YTC)? (2) If you bought this bond, do you think you would be more likely to earn the YTM or the YTC? Why?Bond Value as Maturity Approaches An investor has two bonds in his portfolio. Each bond matures in 4 years, has a face value of 1,000, and has a yield to maturity equal to 9.6%. One bond, Bond C, pays an annual coupon of 10%; the other bond, Bond Z, is a zero coupon bond. Assuming that the yield to maturity of each bond remains at 9.6% over the next 4 years, what will be the price of each of the bonds at the following time periods? Fill in the following table:
- Yield to Maturity and Yield to Call Arnot International’s bonds have a current market price of $1,200. The bonds have an 11% annual coupon payment, a $1,000 face value, and 10 years left until maturity. The bonds may be called in 5 years at 109% of face value (call price = $1,090). What is the yield to maturity? What is the yield to call if they are called in 5 years? Which yield might investors expect to earn on these bonds, and why? The bond’s indenture indicates that the call provision gives the firm the right to call them at the end of each year beginning in Year 5. In Year 5, they may be called at 109% of face value, but in each of the next 4 years the call percentage will decline by 1 percentage point. Thus, in Year 6 they may be called at 108% of face value, in Year 7 they may be called at 107% of face value, and so on. If the yield curve is horizontal and interest rates remain at their current level, when is the latest that investors might expect the firm to call the bonds?Yield to Maturity and Current Yield You just purchased a bond that matures in 5 years. The bond has a face value of 1,000 and an 8% annual coupon. The bond has a current yield of 8.21%. What is the bonds yield to maturity?Consider a bond with a face value of $2,000 that pays a coupon of $150 for 10 years. Suppose the bond is purchased at $500, and can be resold next year for $400. What is the rate of return of the bond? What is the yield to maturity of the bond?
- Consider a bond with a face value of $2,000 that pays a coupon of $150 for 10 years. Suppose the bond is purchased at $500, and can be resold next year for $400. What is the yield to maturity of the bond? 30% 0% 35.4% 100.2%Consider a bond with a face value of $5,000 that pays a coupon of $200 for 5 years. Suppose the bond is purchased at $5,000, and can be resold next year for $4,800. What is the rate of return and the yield to maturity of the bond? rate of return = 4%, yield to maturity = 0% rate of return = 0%, yield to maturity = 4% rate of return = 8%, yield to maturity = - 4% rate of return = 4%, yield to maturity = 4%Question 1: Consider a coupon bond with an 8% annual coupon rate, a 10% interest rate, and a $1000 face value. The bond will mature in 4 years. What is the duration of this bond? Duration is defined as a weighted average of the maturities of the cash payments. Suppose the weight assigned to the maturity of 1 year is W. A: Duration=2.28 and W=7.77% B: Duration=3.56 and W=20.5% C: Duration=3.56 and W=23.1% D: Duration=3.56 and W=7.77%
- suppose a 30 year, pay coupon of 4% is priced to yield 5%. par = 1000. the bond pays its coupon annually. calculate the instrinsic value of the bond. decide whether the bond is at premium or discount? please show the calculation using excelConsider 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?Suppose a ten-year bond with a $10,000 face value pays a 5.0% annual coupon (at the end of the year), has 2 years left to maturity, and has a discount rate of 6.5%. Further suppose you purchase this bond, but then, after you purchase it, you discover that the credit (i.e. "default" risk) on the bond has increased. Ceteris paribus, it follows that the present value (i.e. the market price) would and the yield would Select one: O a. increase; decrease O b. increase; increase c. decrease; increase d. decrease; decrease
