a) Calculate the yield rates for two bonds described below. Bond A $8,000 6.5% Annually $10,000 $9,000 9% Annually Purchase Price Coupon Rate Face Value $10,000 Matures in 6 years 6 years b) Correctly use Rate of Return (ROR) analysis to determine which, if either, bond an investor with a MARR of 10% should purchase. c) Confirm your answer to part (b) using Present Worth analysis.
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- 2. Determine the purchase price and the amount of premium/discount of the given bonds. Face Value Coupon Rate Yield Rate Redemption Date Purchase Date Purchase Price ? a. $1000.00 5.25% 5.25% January 01, 2024 January 01, 2019 b. $5000.00 4.75% 6.75% October 20, 2028 October 20, 2018 ? c. $10,000.00 7.85% 4.15% August 16, 2034 August 16, 2014 ? Amount of Premium/Discount ? ? ?Determine the price of a $380,000 bond issue under each of the following independent assumptions: Note: Use tables, Excel, or a financial calculator. Round your intermediate calculations and final answer to the nearest whole dollar. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) 1. 2 N 3. Face value 380,000 380,000 380,000 Maturity 10 years 10 years 20 years Interest Paid annually semiannually semiannually Stated Rate 11% 11% 10% Effective Rate 11% 12% 10% PriceCalculate the purchase price of the following bonds. Indicate whether the bonds are priced at a discount, at par or at a premium. Give your answers in dollars and cents to the nearest cent. Face Value Coupon Rate Years to Maturity Market Rate a) $100 r = 6.75% 5 j2 = 6.75% b) $1,000 r = 8% 11 j2 = 6.25% c) $10,000 r = 7% 20 j2 = 8.75% Quoted coupon rates and market rates are nominal annual rates compounded semi-annually. a)Price = $ This bond is priced at:a discountpara premium b)Price = $ This bond is priced at:a discountpara premium c)Price = $ This bond is priced at:a discountpara premium
- Determine the price of a $220,000 bond issue under each of the following independent assumptions: Note: Use tables, Excel, or a financial calculator. Round your Intermediate calculations and final answer to the nearest whole dollar. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) Face value Maturity 1. 220,000 10 years Interest Paid annually Stated Rate Effective Rate Price 11% 11% 2. 220,000 10 years semiannually 11% 12% 3. 220,000 20 years semiannually 12% 12%A) You invest OMR 900 in a bond which gives 9% interest over a period of 2 years, the compounding is done quarterly. How much will be the value of the investment? Select one: a. 1053.24 b. 1254.74 c. 1075.34 d. 753.24 B) Which of the statements are not correct Select one: a. Profits refers to earnings before Interest and Taxes b. Investment decisions relate to pattern of financing c. Dividend pay out ratio refers to what proportion is paid to shareholders d. Borrowed funds are relatively cheaper than shareholders’ fundsB. Directions: Compute for the following given statement and justify your answer. 1. Consider two bonds. Bond A has a face value of P100,000 and a stated rate of 12%. Bond B has a face value of P100,000 and a stated rate of 8%. Both bonds have the same maturity. Which bond has the greatest interest rate risk? 2. Consider two bonds. Bond X has a face value of P100,000 and five years remaining to maturity. Bond Y has a face value of P100,000 and ten years remaining to maturity. Both bonds have the same stated rate of 12%. Which bond has the greatest interest rate risk?
- Lantech investor is deciding between two bonds: Bond A pay $72 annual interest and has a market value of $925. It has 10 years to maturity. Bond B pays $62 annual interest and has a market value of $910. It has two years to maturity. Par value of the bonds is $1,000. A. What is the current yield on both bonds? B. Which bond should be chosen and why? C. A drawback of current yield is that is doesn't consider the total life of the bond. E.g. Yield to maturity on Bond A is 8.33 percent. What is the yield to maturity on Bond B? D. Is your answer changed from parts B and C based on which bond should be chosen?Consider the following newly issued bonds: Inputs Juan Rojo, Incorporated 10-Year Bond McAllister Avionics 9-Year Bond Settlement Date 01-01-2020 01-01-2020 Maturity Date 01-01-2030 01-01-2029 Coupon Rate 0.080 0.050 Redemption Value 100 100 Coupons per Year 2 1 Market Data Initial Yield 0.075 Yield Change 0.010 Required: Using any necessary data above, calculate the Price, the Macaulay Duration and the Modified Duration for each bond. Then, predict the price change given a change in the prevailing yield. Then, assume the market yield changed, as described below. In the second table, calculate the approximate price change and new price according to duration (the first-order approximation). (Use cells A5 to C13 from the given information to complete this question.) Juan Rojo, Incorporated 10-Year Bond McAllister Avionics 9-Year Bond…Consider the following newly issued bonds: Inputs Juan Rojo, Incorporated 10-Year Bond McAllister Avionics 9-Year Bond Settlement Date 01-01-2020 01-01-2020 Maturity Date 01-01-2030 01-01-2029 Coupon Rate 0.080 0.050 Redemption Value 100 100 Coupons per Year 2 1 Market Data Initial Yield 0.075 Yield Change 0.010 Required: Using any necessary data above, calculate the Price, the Macaulay Duration and the Modified Duration for each bond. Then, predict the price change given a change in the prevailing yield. Then, assume the market yield changed, as described below. In the second table, calculate the approximate price change and new price according to duration (the first-order approximation). (Use cells A5 to C13 from the given information to complete this question.) Juan Rojo, Incorporated 10-Year Bond McAllister Avionics 9-Year Bond…
- Suppose that the prices of zero-coupon bonds with various maturities are given in the following table. The face value of each bond is $1,000. Maturity (Years) 1 2 3 4 5 Show Transcribed Text B) How could you construct a 1-year forward loan beginning in year 3? (Face Value) C) How could you construct a 1-year forward loan beginning in year 4? (Face Value) Required A Required B Complete this question by entering your answers in the tabs below. Face value Rate of synthetic loan → Show Transcribed Text Price $ 970.93 898.39 836.92 How could you construct a 1-year forward loan beginning in year 3? Note: Round your Rate of synthetic loan answer to 2 decimal places. Required A 776.20 685.42 Required B Face value Rate of synthetic loan Required C 7.85 % Required C How could you construct a 1-year forward loan beginning in year 4? Note: Round your Rate of synthetic loan answer to 2 decimal places. Ċ 13.29 %Problem: You are given the following data for two bonds with semiannual payments (A and B) Bond Settlement Date B 2/15/2020 2/15/2020 Maturity Date Coupon rate 2/15/2040 2/15/2040 4% 8% Similar bonds with 20 year to maturity sell for 9% coupon rates in the market. a) Calculate the bond value for bond A and B b) Calculate the YTM for bond A and B Bond Valuation Settlement Date 2/15/2020 2/15/2020 Maturity Date Coupon rate Required return Redemption Value Frequency Basis Calculate the PV of the bond in U.S. S 2/15/2040 2/15/2040 8% 4% 4.50% 4.50% 100 100 2 a) Use the Price Function B) Use the Yield FunctionRevise your worksheet assumptions as indicated below and then answer the questions that folllow: Face amount Stated rate Number of years Market rate Ⓒ Discount O Premium Required: 1. Was the bond issued at a discount or a premium? Date $3,050,000 2. Complete the first four rows of the amortization schedule. (Round your answers to 2 decimal places.) June 30, 2021 December 31, 2021 June 30, 2022 December 31, 2022 8% 10 9% Cash Paid Interest Change in Carrying Expense Value Carrying Value