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: Cengage Learning
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Textbook Question
Chapter 12, Problem 9FPE
Which of these two bonds offers the highest current yield? Which one has the highest yield to maturity?
- a. A 6.55 percent, 22-year bond quoted at 52.000
- b. A 10.25 percent, 27-year bond quoted at 103.625
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Students have asked these similar questions
Which of the following four bonds has the least Macaulay duration? A bond with
A.
4.75% yield and 40-year maturity.
B.
5.25% yield and 30-year maturity.
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6.75% yield and 20-year maturity.
D.
7.25% yield and 10-year maturity.
None
Question:
Bond prices depend on the market rate of interest, stated rate of interest, and time.
a. Compute the price of the following 7% bonds of United Telecom.
1. $500,000 issued at 76.75.
2. $500,000 issued at 104.75.
3. $500,000 issued at 95.75.
4. $500,000 issued at 104.25.
b. Which bond will United Telecom have to pay the most to retire the bond at maturity?
Chapter 12 Solutions
Pfin (with Mindtap, 1 Term Printed Access Card) (mindtap Course List)
Ch. 12 - Describe the various types of risks to which...Ch. 12 - Prob. 2LOCh. 12 - Prob. 3LOCh. 12 - Prob. 4LOCh. 12 - Prob. 5LOCh. 12 - Prob. 6LOCh. 12 - What makes for a good investment? Use the...Ch. 12 - An investor is thinking about buying some shares...Ch. 12 - The price of Outdoor Designs, Inc. is now 85. The...Ch. 12 - The Castle Company recently reported net profits...
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- Describe and differentiate between a bonds (a) current yield and (b) yield to maturity. Why are these yield measures important to the bond investor? Find the yield to maturity of a 20-year, 9 percent, 1,000 par value bond trading at a price of 850. Whats the current yield on this bond?arrow_forwardComment on the attractiveness of the bonds in two ways: a) How does the yield compare to the benchmark? Market YTM: 3.62% YTM of bond: 3.72% b) How does the current price compare to the benchmark-yield implied price? Price: 100.875 Implied price: 100.923arrow_forwardAssume a face value of a bond JD 1000, when the bond reaches maturity, if it is selling at:a. JD 900, bond value goes down to JD 850b. JD 1000, bond value goes down to JD 900c. JD 1100, bond value goes up to JD 1200 d. JD 1050, bond value goes down to JD 1000arrow_forward
- If the YTM on the following bonds are identical except, what is the price of bond B? Bond A Bond B Face value $1,000 $1,000 Semiannual coupon $45 $35 Years to maturity 20 20 Price $1,098.96 ?arrow_forwardWhich of the following bonds will have the larger price change (dollar value) for a 75- basis point change in yield? A. A $120 dollar bond with duration 2.25 B. A $70 dollar bond with duration 3.25 C. A $160 dollar bond with duration 1.75 D. A $200 dollar bond with duration 1.25 E. A $300 dollar bond with duration 0.75arrow_forwardRank from highest credit risk to lowest risk the following bonds, with the same time to maturity, by their yield to maturity: (Rank: 1 = highest, 4 = lowest) Treasury bond with yield of 5.45 percent IBM bond with yield of 7.59 percent Trump Casino bond with yield of 8.86 percent Banc One bond with a yield of 6.09 percentarrow_forward
- 6. Yield to Maturity Each of the bonds shown below pays interest annually. Bond Par Value Coupon Years to Maturity Current Value A 12% 15 B 10% 10 C $1000 13% 10 D $1000 8% 4 a) Calculate the yield to maturity (YTM) for each bond. $1000 $500 $850 $560 $1200 $900 b) What relationship exists between the coupon rate and yield to maturity and the par value and market value of a bond? Explain.arrow_forwardA bond with a face amount of $12,000 has a current price quote of 107.15. What is thebond’s price?a. $12,107.15b. $1,285.80c. $12,858.00d. $128,580arrow_forwardwhich of the following bonds would you expect to have the highest yield? 1. 10-year US treasury bond 2. 1-year US treasury bond 3. 10-year corporate bond 4. 5-year municipal bond 5. 5-year US treasury bondarrow_forward
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