Corporate Finance
12th Edition
ISBN: 9781259918940
Author: Ross, Stephen A.
Publisher: Mcgraw-hill Education,
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Chapter 8, Problem 17QAP
Summary Introduction
To calculate: Price of the bonds in
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Bond X is a premium bond making semiannual payments. The bond has a coupon rate
of 8.2 percent, a YTM of 6.2 percent, and has 15 years to maturity. Bond Y is a discount
bond making semiannual payments. This bond has a coupon rate of 6.2 percent, a YTM
of 8.2 percent, and also has 15 years to maturity. Assume the interest rates remain
unchanged and both bonds have a par value of $1,000.
a. What are the prices of these bonds today? (Do not round intermediate calculations
and round your answer to 2 decimal places, e.g., 32.16.)
b. What do you expect the prices of these bonds to be in one year? (Do not round
intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
c. What do you expect the prices of these bonds to be in three years? (Do not round
intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
d. What do you expect the prices of these bonds to be in eight years? (Do not round
intermediate calculations and round your answers to 2…
Bond X is a premium bond making semiannual payments. The bond has a coupon rate of 9.3 percent, a YTM of 7.3 percent, and has 18 years to maturity. Bond Y is a discount bond making semiannual payments. This bond has a coupon rate of 7.3 percent, a YTM of 9.3 percent, and also has 18 years to maturity. Assume the interest rates remain unchanged and both bonds have a par value of $1,000.
a.
What are the prices of these bonds today? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
b.
What do you expect the prices of these bonds to be in one year? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
c.
What do you expect the prices of these bonds to be in three years? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
d.
What do you expect the prices of these bonds to be in eight years? (Do not round intermediate calculations and round…
Bond X is a premium bond making semiannual payments. The bond has a coupon rate
of 9.3 percent, a YTM of 7.3 percent, and has 18 years to maturity. Bond Y is a discount
bond making semiannual payments. This bond has a coupon rate of 7.3 percent, a YTM
of 9.3 percent, and also has 18 years to maturity. Assume the interest rates remain
unchanged and both bonds have a par value of $1,000.
a. What are the prices of these bonds today? (Do not round intermediate calculations
and round your answer to 2 decimal places, e.g., 32.16.)
b. What do you expect the prices of these bonds to be in one year? (Do not round
intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
c. What do you expect the prices of these bonds to be in three years? (Do not round
intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
d. What do you expect the prices of these bonds to be in eight years? (Do not round
intermediate calculations and round your answers to 2…
Chapter 8 Solutions
Corporate Finance
Ch. 8 - Prob. 1CQCh. 8 - Prob. 2CQCh. 8 - Prob. 3CQCh. 8 - Yield to Maturity Treasury bid and ask quotes are...Ch. 8 - Coupon Rate How does a bond issuer decide on the...Ch. 8 - Real and Nominal Returns Are there any...Ch. 8 - Prob. 7CQCh. 8 - Prob. 8CQCh. 8 - Term Structure What is the difference between the...Ch. 8 - Crossover Bonds Looking back at the crossover...
Ch. 8 - Municipal Bonds Why is it that municipal bonds are...Ch. 8 - Prob. 12CQCh. 8 - Treasury Market Take a look back at Figure 8.4....Ch. 8 - Prob. 14CQCh. 8 - Bonds as Equity The 100-year bonds we discussed in...Ch. 8 - Bond Prices versus Yields a. What is the...Ch. 8 - Interest Rate Risk All else being the same, which...Ch. 8 - Prob. 1QAPCh. 8 - Prob. 2QAPCh. 8 - Prob. 3QAPCh. 8 - Prob. 4QAPCh. 8 - Prob. 5QAPCh. 8 - Prob. 6QAPCh. 8 - Prob. 7QAPCh. 8 - Prob. 8QAPCh. 8 - Prob. 9QAPCh. 8 - Prob. 10QAPCh. 8 - Prob. 11QAPCh. 8 - Prob. 12QAPCh. 8 - Prob. 13QAPCh. 8 - Prob. 14QAPCh. 8 - Prob. 15QAPCh. 8 - Prob. 16QAPCh. 8 - Prob. 17QAPCh. 8 - Prob. 18QAPCh. 8 - Prob. 19QAPCh. 8 - Prob. 20QAPCh. 8 - Prob. 21QAPCh. 8 - Prob. 22QAPCh. 8 - Prob. 23QAPCh. 8 - Prob. 24QAPCh. 8 - Prob. 25QAPCh. 8 - Prob. 26QAPCh. 8 - Prob. 27QAPCh. 8 - Prob. 28QAPCh. 8 - Prob. 29QAPCh. 8 - Prob. 30QAPCh. 8 - Prob. 31QAPCh. 8 - Prob. 32QAPCh. 8 - Prob. 33QAPCh. 8 - Prob. 34QAPCh. 8 - Prob. 35QAPCh. 8 - Prob. 1MCCh. 8 - Prob. 3MCCh. 8 - Prob. 5MCCh. 8 - Prob. 6MCCh. 8 - Prob. 7MC
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- Bond X is a premium bond making semiannual payments. The bond has a coupon rate of 9.3 percent, a YTM of 7.3 percent, and has 18 years to maturity. Bond Y is a discount bond making semiannual payments. This bond has a coupon rate of 7.3 percent, a YTM of 9.3 percent, and also has 18 years to maturity. Assume the interest rates remain unchanged and both bonds have a par value of $1,000. d. What do you expect the prices of these bonds to be in eight years? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g.,32.16.) e. What do you expect the prices of these bonds to be in 12 years? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) f. What do you expect the prices of these bonds to be in 18 years? (Do not round intermediate calculations.) Bond X Bond Y D. Price In 8 years E price in 12 years F price in 18 yearsarrow_forwardBond X is a premium bond making semiannual payments. The bond has a coupon rate of 8.8 percent, a YTM of 6.8 percent, and has 13 years to maturity. Bond Y is a discount bond making semiannual payments. This bond has a coupon rate of 6.8 percent, a YTM of 8.8 percent, and also has 13 years to maturity. Assume the interest rates remain unchanged and both bonds have a par value of $1,000. Bond X is a premium bond making semiannual payments. The bond has a coupon rate of 8.8 percent, a YTM of 6.8 percent, and has 13 years to maturity. Bond Y is a discount bond making semiannual payments. This bond has a coupon rate of 6.8 percent, a YTM of 8.8 percent, and also has 13 years to maturity. Assume the interest rates remain unchanged and both bonds have a par value of $1,000. Bond X: Price Today Price in 1 year Prince in 3 years Price in 8 years Price in 12 years Price in 13 years Bond Y: Price Today Price in 1 year Prince in 3 years Price in 8 years Price in 12 years Price in 13 yearsarrow_forwardBond X is a premium bond making semiannual payments. The bond has a coupon rate of 8.8 percent, a YTM of 6.8 percent, and has 13 years to maturity. Bond Y is a discount bond making semiannual payments. This bond has a coupon rate of 6.8 percent, a YTM of 8.8 percent, and also has 13 years to maturity. Assume the interest rates remain unchanged and both bonds have a par value of $1,000. a. What are the prices of these bonds today? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b. What do you expect the prices of these bonds to be in one year? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) c. What do you expect the prices of these bonds to be in three years? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) bond X Bond Y a price today b price 1 years c price 3 yearsarrow_forward
- Bond X is a premium bond making semiannual payments. The bond has a coupon rate of 9.6 percent, a YTM of 7.6 percent, and has 13 years to maturity. Bond Y is a discount bond making semiannual payments. This bond has a coupon rate of 7.6 percent, a YTM of 9.6 percent, and also has 13 years to maturity. Assume the interest rates remain unchanged and both bonds have a par value of $1,000. a. What are the prices of these bonds today? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b. What do you expect the prices of these bonds to be in one year? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) c. What do you expect the prices of these bonds to be in three years? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) d. What do you expect the prices of these bonds to be in eight years? (Do not round intermediate calculations and…arrow_forwardBond A is a premium bond making semiannual payments. The bond has a coupon rate of 7.5%, a YTM of 6%, and 13 years to maturity. Bond B is a discount bond making semiannual payments. This bond has a coupon rate of 6%, a YTM of 7.5%, and also 13 years to maturity. What are the prices of these bonds today assuming both bonds have a $ 1000 par value? If interest rates remain unchanged, what do you expect the prices of these bonds to be in 2 years and in 12 years?arrow_forwardBond X is a premium bond making semiannual payments. The bond pays a coupon rate of 8 percent, has a YTM of 6 percent, and has 18 years to maturity. Bond Y is a discount bond making semiannual payments. This bond pays a coupon rate of 6 percent, has a YTM of 8 percent, and also has 18 years to maturity. The bonds have a $1,000 par value. What is the price of each bond today? (Do not round intermediate calculations. Round your answers to 2 decimal places, e.g., 32.16.) Price of Bond X $ Price of Bond Y $ If interest rates remain unchanged, what do you expect the price of these bonds to be one year from now? In eight years? In 13 years? In 17 years? In 18 years? (Do not round intermediate calculations. Round your answers to 2 decimal places, e.g., 32.16.) Price of bond Bond X Bond Y One year $ $ Eight years $ $ 13 years $ $ 17 years $ $ 18 years $ $arrow_forward
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