Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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- If the bonds are noncallable, what is the price of the bonds today?
- If the bonds are callable one year from today at $1,080, will their price be greater or less than the price you computed in (a)? Why?
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- User You are considering buying bonds in ACBB, Inc. The bonds have a par value of $1,000 and mature in 14 years. The annual coupon rate is 14.0% and the coupon payments are annual. The bond are currently selling $799.68 based on a yield to maturity of 18%. What is the bond expected capital gain/loss if the bond are held maturity’s ?arrow_forwardDoisneau20-year bonds have an annual coupon interest of8 percent, make interest payments on a semiannual basis, and have a $1,000par value. If the bonds are trading with a market's required yield to maturity of18 percent, are these premium or discount bonds? Explain your answer. What is the price of the bonds?arrow_forward16. You are considering investing in three different bonds. Each bond maturesin 10 years and has a face value of $1,000. The bonds have the same levelof risk, so the yield to maturity is the same for each. Bond A has an8 percent annual coupon, Bond B has a 10 percent annual coupon, and Bond Chas a 12 percent annual coupon. Bond B sells at par. Assuming thatinterest rates are expected to remain at their current level for the next10 years, which of the following statements is most correct?a. Bond A sells at a discount (its price is less than par), and itsprice is expected to increase over the next year.b. Bond A’s price is expected to decrease over the next year, Bond B’sprice is expected to stay the same, and Bond C’s price is expected toincrease over the next year.c. Since the bonds have the same yields to maturity, they should allhave the same price, and since interest rates are not expected tochange, their prices should all remain at their current levels untilthe bonds mature.d. Bond…arrow_forward
- Bells Inc. plan to issue new 7.0% coupon, 25-year semi-annual bonds with a standard par value.If the bonds are currently selling at $1100.00, what would the yield to maturity be for bondinvestors?arrow_forwardDizzy Inc. wishes to issue new bonds but is uncertain how the market would set the yield to maturity. The bonds would be 20-year, 3.5% semi-annual coupon bonds with a $1,000 par value. Dizzy has determined that these bonds would sell for $887.45 each. Expressed as an annual percentage rate, what is yield to maturity for these bonds? 6.54% 9.54% 8.15% 7.35%arrow_forwardVijayarrow_forward
- 1. Bonds of TLM Corporation with a par value of R1000 sell for R960, mature in five years, and have a 7% annual coupon rate paid semi-annually. Calculate the current yield and the yield to maturity 1. Assume a 10-year, $1,000 par value bond with a 10 percent annual coupon if its required rate of return is 10 percent what is the value of the bond? 2. What would be the value of the bond described in part bif, just after it had been issued, the expected inflation rate rose by 3 percentage points? Would we now have a discount or a premium bond? 3. What would happen to the bonds' value if inflation fell, by 3 %? Would we now have a premium or a discount bond?arrow_forwardDoisneau 20 year bonds have an annual coupon interest of 7 percent, make interest payments on a semiannual basis, and have a$1,000 par value. If the bonds are trading with a market's required yield to maturity of 12 percent, are these premium or discount bonds? Explain your answer. What is the price ofthe bonds?arrow_forward2. A bond has a par value of $1,000, a time to maturity of 10 years, and a coupon rate of 8% with interest paid annually. If the current market price is $800, what will be the approximate capital gain yield of this bond over the next year if its yield to maturity remains unchanged?arrow_forward
- Assets, Incorporated, plans to issue $6 million of bonds with a coupon rate of 7.8 percent, a par value of $1,000, semiannual coupons, and 25 years to maturity. The current market interest rate on these bonds is 7.1 percent. In one year, the interest rate on the bonds will be either 9 percent or 5 percent with equal probability. Assume investors are risk-neutral. a. If the bonds are noncallable, what is the price of the bonds today?arrow_forwardA bond that matures in 1212 years has a $1 comma 0001,000 par value. The annual coupon interest rate is 1414 percent and the market's required yield to maturity on a comparable-risk bond is 1515 percent. What would be the value of this bond if it paid interest annually? What would be the value of this bond if it paid interest semiannually?arrow_forwardIMS corporation bonds have a coupon rate of 12% paid annually and 15 years to maturity. If the market rate of interest is 10%, the bonds should sell for: $863.78 $1,000.00 $1,152.12 $1,726.58arrow_forward
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