Consider three N-year bonds. The bonds all have the same par value and are all redeemable at par. Each of the bonds pays semiannual coupons and is priced using the same yield rate. -- Bond A pays coupons of 46 and has a price of 1200. Bond B pays coupons of 35 and has a price of 1000. Bond C pays coupons of 59. -- -- Determine the price of Bond C. 1531 1436 1389 1484 O 1342

Consider three N-year bonds. The bonds all have the same par value and are all redeemable at par. Each of the bonds pays semiannual coupons and is priced using the same yield rate. -- Bond A pays coupons of 46 and has a price of 1200. Bond B pays coupons of 35 and has a price of 1000. Bond C pays coupons of 59. -- -- Determine the price of Bond C. 1531 1436 1389 1484 O 1342

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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c) Suppose you observe the following three bonds. Assume that all bonds are denominated at $100 face value per contract and that they pay their coupons annually. Price Coupon Maturity (years) Bond A 111.42 15 3 Bond B 108.33 15 Bond C 116.61 15 1 i) Compute the spot rates r0,1, r0,2 and r0,3. ii) Compute the forward rates r1,2 and r2,3.
Suppose a sixy ear bond is purchased for $4800. The face value of the bond when it matures is $7032. Find the APR.
Consider the following bonds: •Bond A: A 2-year zero-coupon bond with a face value of $100 and 6% YTM. •Bond B: A 2-year par-value bond with a face value of $100 and 6% coupon rate. *Bond C: A 2-year par-value bond with a face value of $100 and 7% coupon rate. Suppose the yield curve shifts upwards by one percent. Which bond among bonds A, B, and C will experience the largest percentage price change? Which will have the lowest percentage price change? O a. Bond A; Bond C O b. Bond A; Bond B O c. Bond B; Bond C O d. Bond C; Bond B
Suppose that all bonds have $1,000 of face value. The current prices of zero coupon bonds are as follows: $960 for a one-year bond; $910 for a two-year bond; $850 for a three-year bond. a. What is the price of a three-year bond with 8% annual coupon payment? b. What is the YTM of the two-year zero coupon bond? c. Consider the following two-year bonds: (i) a zero coupon bond as above; (ii) a bond with 6% annual coupon payment. Whose YTM is higher?
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 four bonds having annual payments as shown in the following table Year Bond A Bond B Bond C Bond D Year 1 100 50 0 0 + 1000 Year 2 100 50 0 0 Year 3 100+1000 50+ 1000 0 + 1000 0 (a) If each of the bonds is traded to produce a 15% yield, determine the price of each bond. (b) If Bond C is sold for $900, what is the yield to maturity? (c) What is the yield to maturity if Bond D is sold for $900?
Excel Activity: Bond Valuation Clifford Clark is a recent retiree who is interested in investing some of his savings in corporate bonds. His financial planner has suggested the following bonds: • Bond A has a 10% annual coupon, matures in 12 years, and has a $1,000 face value. • Bond B has an 8% annual coupon, matures in 12 years, and has a $1,000 face value. • Bond C has a 12% annual coupon, matures in 12 years, and has a $1,000 face value. Each bond has a yield to maturity of 10%.
Consider two bonds. Bond A has a face value of ₱100,000 and a stated rate of 12%. Bond B has a face value of ₱100,000 and a stated rate of 8%. Both bonds have the same maturity. Which bond has the greatest interest rate risk? Provide a computation
A bond's credit rating provides a guide to its price. Assume Aaa bonds yield 3.6% and Baa bonds yield 4.6%. Assume a 10% five-year bond with annual coupons and a face value of $1,000. (Do not round intermediate calculations. Round your answers to 2 decimal places.) a. What is the bond's price if it is rated as Aaa? b. What is the bond's price if it is rated as Baa?
A bond that pays interest semiannually has a price of $981.73 and a semiannual coupon payment of $27.75. If the par value is $1,000, what is the current yield?
Calculate 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
A bond that pays interest semiannually has a coupon rate of 5.08 percent and a current yield of 5.37 percent. The par value is $1,000. What is the bond's price?

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