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Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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
Transcribed Image Text:The one-year return on a 10-year coupon bond with face value of $10,000 and a 4%
coupon rate that initially sells for par is
SHS
1.
All of the above
ans 02.0-0001-4 yd ne
2. b)-3% if interest rates immediately rise from 4% to 5% after the bond is sold
3. c) 12% if interest rates immediately fall from 4% to 3% after the bond is sold
4. d) 4% if interest rates do not change
5. e) None of the above
woul
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- For a 20-year $1000 par value 8% annual coupon bond that selling at a premium and makes semiannual coupon payments, what of the following is TRUE? O A. The YTM of this bond is below 8%. O B. The price of this bond is below its par value. O C. Because this bond is selling at a premium, it would be worth more than $1000 at maturity. O D. The bond pays $160 in interest every six months.arrow_forwardA 12% bond of Alpha Company with 15 year to maturity is selling in the market for $955, it has a $1,000 par value and pays interest annually. a. Calculate the both bond's yield to maturity (YTM).b. If your required rate of return is 12% would you buy this bond or not.b. Describe the relationship between the coupon rate and yield to maturity and market value of a bond.arrow_forwardAssume that you own a $1 million par value corporate bond that pays 7% in coupon interest (3.5% semiannual ), has 4 years remaining to maturity, and is immediately callable at par. Its current market yield is 7% and it is priced at par. If rates on comparable securities fall by more than 40 basis (0.2% semiannually), the bond will be called(a) Calculate the bonds price if the market rate increases by 50 basis (0.25% semiannually) using the present value formula from(b) Calculate the bonds effective duration assuming a 50 basis - increase or decrease in market ratesarrow_forward
- 4) A 10 year bond with $50, 000 face value has semiannual coupon rate 4% and semiannual yield rate 2%. Fill out the following amortization table. Principle Outstanding t Payment Interest герaid Balance 1 2 3 12arrow_forwardFixed Income Securities4. Today is t = 0. You have just bought a five-year zero-coupon Treasurybond with $100 face value. You paid $80.(a) What is the annually compounded yield to maturity on the bond?(b) Suppose that yields at all maturities decrease to 2% immediately after you havepurchased the bond. Calculate the annualized holding period return if you sellthe bond one year after you have purchased it, at t = 1.(c) What is the annually compounded yield to maturity on the bond at t = 1?arrow_forward3. You are given the following spot rates: Term Spot rate 1 5.00% 2 6.59% 3 6.80% 4 7.00% One year from now, you are considering the purchase of a 3-year zero-coupon bond with a par value of $1,000. What price would you pay for the bond in one year?arrow_forward
- What is the yield to maturity of a five-year, $5,000 bond with a 4.4% coupon rate and semiannual coupons if this bond is currently trading for a price of $4,704? OA: 5.78% B. 6.93% C. 2.89% OD. 8.09%arrow_forwardPlease show step by solutions. do not skip stepsarrow_forwardOnly by excel please or else skip itarrow_forward
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