You want to form a bond portfolio that pays $100 every six months, for the next year. That is, $100 in 0.5 years and $100 in 1 year. To achieve this goal, you will purchase Bonds A and B, which have a face value of $100 and pay semi-annual coupons. The following information is available: Bond A • Coupon rate (APR): 4.3% • Maturity: 1 year Bond B • Coupon rate (APR): 9.5% • Maturity: 1 year Calculate the number of units you must buy of Bond B to achieve your goal. Express your answer as a number with two decimals. E.g. If your answer is 102.544, then enter it as 102.54

You want to form a bond portfolio that pays $100 every six months, for the next year. That is, $100 in 0.5 years and $100 in 1 year. To achieve this goal, you will purchase Bonds A and B, which have a face value of $100 and pay semi-annual coupons. The following information is available: Bond A • Coupon rate (APR): 4.3% • Maturity: 1 year Bond B • Coupon rate (APR): 9.5% • Maturity: 1 year Calculate the number of units you must buy of Bond B to achieve your goal. Express your answer as a number with two decimals. E.g. If your answer is 102.544, then enter it as 102.54

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 6FPE

See similar textbooks

Similar questions

Consider a 10-year bond with a face value of $1,000 that has a coupon rate of 5.5%, with semiannual payments. a. What is the coupon payment for this bond? b. Draw the cash flows for the bond on a timeline
Consider a 10-year bond with a face value of $1,000 that has a coupon rate of 5.9%, with semiannual payments. a. What is the coupon payment for this bond? b. Draw the cash flows for the bond on a timeline. a. What is the coupon payment for this bond? The coupon payment for this bond is $ (Round to the nearest cent.)
You want to invest in a bond for one year, and are deciding between the following two choices - Bond A and Bond B, both of which have a maturity of 1 year and a par value of $1,000.Bond A is a regular(i.e., nominal- return) with a couponrate of 3% per year, payable semi-annually. The current price of Bond A is $998. Bond B is a real-return bond with a coupon rate of 2% per year, payable annually. The current price of Bond B is $1,000. What is the inflation rate (over the next year) that will make the (nominal) ratesof return of the two choices the same?
Consider a bond (with par value = $1,000) paying a coupon rate of 10% per year semiannually when the market interest rate is only 4% per half-year. The bond has three years until maturity. Required: a. Find the bond's price today and six months from now after the next coupon is paid. b. What is the total (6-month) rate of return on the bond? Complete this question by entering your answers in the tabs below. Required A Required B Find the bond's price today and six months from now after the next coupon is paid. Note: Round your answers to 2 decimal places. Current price Price after six months $ $ 1,052.42 1,044.52
You are given the following expected 1-year rates for each of the next 5 years and the cash flows for Bond A (assume that it pays an annual coupon). Based on this information, determine the yield-to- maturity for Bond A. Year 1 23 3 4 5 7.17% 6.80% O 7.54% O6.43 % O 7.91% Expected 1-Year Rate 9.00% 8.00% 7.00% 6.00% 5.00% Bond A Cash Flow $ 100.00 $ 100.00 $ 100.00 $ 100.00 $1,100.00 4
Consider a 20-year bond with a face value of $1,000 that has a coupon rate of 5.7%, with semiannual payments. a. What is the coupon payment for this bond? b. Draw the cash flows for the bond on a timeline. (Round to the nearest cent.)
For a company, you plan to buy the following bond: Time to maturity, 6 years; coupon rate, 8%; Coupon payment, annual; Market interest rate, 8%; Face value, $1,000. Using Excel, calculate the duration of the bond. Using Excel, calculate the accumulated value of invested payment(or receipt) when you find market interest rate a year later is now 8%, 9%, and 7%, respectively. Using Excel, calculate geometric average rate of return (or realized compound return).
A bond that has features: coupon of rate of 5 percent principal: $1,000 term to maturity: 10 years a. what will the holder receive when the bond matures? b. if the current rate of interest on comparable debt is 8 percent, what should be the price of this bond? would you expect the firm to call this bond? why? c. if the bond has a sinking fund that requires the firm to set aside annually with a trustee sufficient funds to retire the entire issue at maturity, how much must the firm remit each year for ten years if the fundas earn 8 percent annually and there is $100 million oustanding?
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 isdefined as a weighted average of the maturities of the cash payments. Suppose the weightassigned to the maturity of 1 year is W. Show your work 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%
You have a bond with the following features: - Semi-annual coupon payments. - Coupon rate 7.60%. - Face value $1,000. - 3.5 years to maturity. - Current market price $1,130. Requirements (A, B, and C are independent): 1. Calculate the duration and modified duration for this bond. Duration ___ Mduration ___ 2. Now, let’s assume the modified duration of this bond is 3 years. If the yield increases by 30 bps (basis points), what will the new price of the bond using modified duration? 3. If the yield drops by 75 bps, what is the actual new price of the bond?
A bond has the following features: Coupon rate of interest (paid annually): 12 percent Principal: $1,000 Term to maturity: 11 years What will the holder receive when the bond matures? If the current rate of interest on comparable debt is 8 percent, what should be the price of this bond? Assume that the bond pays interest annually. Use Appendix B and Appendix D to answer the question. Round your answer to the nearest dollar. $ Would you expect the firm to call this bond? Why? , since the bond is selling for a . If the bond has a sinking fund that requires the firm to set aside annually with a trustee sufficient funds to retire the entire issue at maturity, how much must the firm remit each year for eleven years if the funds earn 8 percent annually and there is $90 million outstanding? Use Appendix C to answer the question. Round your answer to the nearest dollar. $
Consider a bond with a face value of $1,000. The coupon is paid semiannually and the marketinterest rate (effective annual interest rate) is 8 percent. How much would you pay for the bondif a. the coupon rate is 6 percent and the remaining time to maturity is 10 years?b. the coupon rate is 10 percent and the remaining time to maturity is 15 years?