Do the Math 14-6 Yield, Price, and YTM A corporate bond maturing in 15 years with a coupon rate of 9.9 percent was purchased for $980 and it now selling for $1,030. a. What is its current yield? Round your answer to one decimal place. 9.4 $ % b. What will be its selling price in two years if comparable market interest rates drop 3.9 percentage points? (Hint: Use Appendix A-2 and Appendix A-4 or the Garman/Forgue companion website.) Round Present Value of a Single Amount and Present Value of Serie of Equal Amounts in intermediate calculations to four decimal places. Round your answer to the nearest cent. c. Calculate the bond's YTM using Equation 14.5 or the Garman/Forgue companion website. Round your answer to two decimal place %

Do the Math 14-6 Yield, Price, and YTM A corporate bond maturing in 15 years with a coupon rate of 9.9 percent was purchased for $980 and it now selling for $1,030. a. What is its current yield? Round your answer to one decimal place. 9.4 $ % b. What will be its selling price in two years if comparable market interest rates drop 3.9 percentage points? (Hint: Use Appendix A-2 and Appendix A-4 or the Garman/Forgue companion website.) Round Present Value of a Single Amount and Present Value of Serie of Equal Amounts in intermediate calculations to four decimal places. Round your answer to the nearest cent. c. Calculate the bond's YTM using Equation 14.5 or the Garman/Forgue companion website. Round your answer to two decimal place %

Personal Finance

13th Edition

ISBN:9781337669214

Author:GARMAN

Publisher:GARMAN

Chapter14: Investing In Stocks And Bonds

Section: Chapter Questions

Problem 6DTM

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Do the Math 14-6 Yield, Price, and YTM A corporate bond maturing in 15 years with a coupon rate of 9.9 percent was purchased for $990 and it now selling for $1,020. a. What is its current yield? Round your answer to one decimal place. 9.70 b. What will be its selling price in two years if comparable màrket interest rates drop 1.9 percentage points? (Hint: Use Appendix A-2 and Appendix A-4 or the Garman/Forgue companion website.) Round Present Value of a Single Amount and Present Value of Series of Equal Amounts in intermediate calculations to four decimal places. Round your answer to the nearest cent. % $ c. Calculate the bond's YTM using Equation 14.5 or the Garman/Forgue companion website. Round your answer to two decimal places. %
Question A .Your company currently has $1,000 par, 6.25% coupon bonds with 10 years to maturity and a price of $1,071. If you want to issue new 10-year coupon bonds at par, what coupon rate do you need to set? Assume that for both bonds, the next coupon payment is due in exactly six months. You need to set a coupon rate of _ % (Fill in the _) Full explain this question and text typing work only We should answer our question within 2 hours takes more time then we will reduce Rating Dont ignore this line
eston Help A firm raises capital by selling $28,000 worth of debt with flotation costs equal to 1% of its par value. If the debt matures in 15 years and has an annual coupon interest rate of 7%, what is the bond's YTM? The bond's YTM is %. (Round to two decimal places.) Тext dia Librai l Calculat r Resource Enter your answer in the answer box and then click Check Answer. ic Study Check Answer Clear All es All parts showing nunication Tools > This course (Introduction to Finance (EIN-101-D02) Distance Spring 2021) is hased on 7utter/Smart- Drincinles of Managerial Finance Rrief Re 4/1. P Type here to search insert
Please show working Please answer ALL OF QUESTIONS 1 AND 2 1. A bond has a $1,000 par value, 10 years to maturity, and an 8% annual coupon and sells for $980. a. What is its yield to maturity (YTM)? Round your answer to two decimal places. ___________% b. Assume that the yield to maturity remains constant for the next 3 years. What will the price be 3 years from today? Do not round intermediate calculations. Round your answer to the nearest cent.____________% 2. Assume that the risk-free rate is 6% and the required return on the market is 8%. What is the required rate of return on a stock with a beta of 1.5? Round your answer to two decimal places.
Q.A $35,000, 5% bond that matures in 10 years has interest payable semiannually. If the quoted price is $36,500, what is the yield rate? Cannot use Excel or a financial calculator. Please show step by step work.
ces A bond has a par value of $1,000, a time to maturity of 10 years, and a coupon rate of 8.40% with interest paid annually. If the current market price is $840, what will be the approximate capital gain of this bond over the next year if its yield to maturity remains unchanged? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Capital gain
A bond that matures in 10 years has a $1,000 par value. The annual coupon interest rate is 8 percent and the market's required yield to maturity on a comparable-risk bond is 13 percent. What would be the value of this bond if it paid interest annually? What would be the value of this bond if it paid interest semiannually? Question content area bottom Part 1 a. The value of this bond if it paid interest annually would be $enter your response here.
Question 2 Assume the yield curve is flat shown as following table. A cash and $duration-neutral butterfly is to be constructed by selling one thousand 7-year coupon paying bonds and purchasing qs and ql coupon paying bonds with maturities 3 and 15 years respectively. More information on the bonds to be used in the strategy is given Note that we are assuming all bonds pay interest semi-annually. (a) Explain how to interpret the modified duration of -8.86 corresponding to the 15-year maturity bond. (b) Write down the system of equations that needs to be solved in order to find qs and ql and verify that the solution to this system is qs = 679.32 and ql =366.23. (c) Find the profit from this strategy if yield curve moves: (i) up to 8% pa and (ii) down to 5% pa. (d) Explain why in practice it may be difficult to profit from the cash and $duration neutral butterfly. (e) Explain the major differences between the 50-50 butterfly strategy and the cash and $duration neutral butterfly.
1. Problem 6.08 (Expectations Theory) eBook Interest rates on 4-year Treasury securities are currently 5.1%, while 6-year Treasury securities yield 7.85%. If the pure expectations theory is correct, what does the market believe that 2-year securities will be yielding 4 years from now? Calculate the yield using a geometric average. Do not round intermediate calculations. Round your answer to two decimal places. % 2. Problem 6.09 (Expected Interest Rate) eBook The real risk-free rate is 3.05%. Inflation is expected to be 4.05% this year, 4.15% next year, and 2.4% thereafter. The maturity risk premium is estimated to be 0.05 × (t - 1)%, where t = number of years to maturity. What is the yield on a 7-year Treasury note? Do not round intermediate calculations. Round your answer to two decimal places. % 3. Problem 6.10 (Inflation) eBook Due to a recession, expected inflation this year is only 3.75%. However, the…
10. A $1,000 face value corporate bond bearing a 12 percent coupon rate will mature in 10 years. If the current market rate of return is 10 percent for bonds of this nature, what is the current theoretical market value of the bond (assume semiannual interest payments)? A) $850.61 B) $887.00 C) $1,124.62 D) $1,170.27
A4 3 You bought one of BB Co.’s 10% coupon bonds one year ago for $1100. These bonds make annual payments, have a face value of $1000 each, and mature seven years from now. Suppose you decide to sell your bonds today, when the required return on the bonds is 8%. If the inflation rate was 3% over the past year, what would be your total real return on investment according to the Exact Fisher Formula?
Yield to Maturity and Required Returns The Brownstone Corporation's bonds have 6 years remaining to maturity. Interest is paid annually, the bonds have a $1,000 par value, and the coupon interest rate is 9%. What is the yield to maturity at a current market price of $807? Round your answer to two decimal places. % What is the yield to maturity at a current market price of $1,113? Round your answer to two decimal places. % Would you pay $807 for one of these bonds if you thought that the appropriate rate of interest was 12% - that is, if rd = 12%.-Select-Yes or No Explain your answer. I. You would buy the bond as long as the yield to maturity at this price does not equal your required rate of return.II. You would buy the bond as long as the yield to maturity at this price is greater than your required rate of return.III. You would buy the bond as long as the yield to maturity at this price equals your required rate of return.-Select-I II III