Intro A corporate bond has 2 years to maturity, a coupon rate of 8%, a face value of $1,000 and pays coupons semiannually. The market interest rate for similar bonds is 0.095. Part 1 What is the price of the bond (in $)? 977.44 Correct ✓ Attempt 1/10 for 10 pts. Since market interest rates (or yields or yield to maturity), are quoted as bond equivalent yields (a type of APR), we need to divide the quoted rate by 2: Period rate: 0.095 = 0.0475 2 The 6-monthly interest payment, or coupon, is: Coupon rate 0.08 Coupon = Face value= 2 21,000 = 40 Bond price: Coupon Par value Р T + r (1+r) (1+r)* 40 0.0475 1 1,000 4+ (1+0.0475) (1+0.0475) = 973.25 Part 2 What is the bond's duration? 2+ decima Submit Part 3 Attempt 2/10 for 9.5 pts. Attempt 1/10 for 10 pts. If yields fall by 0.8 percentage points, what is the new expected bond price based on its duration (in $)? 0+ decima Submit Part 4 Attempt 1/10 for 10 pts. What is the actual bond price after the change in yields (in $)? 0+ decima Submit Part 5 Attempt 1/10 for 10 pts. What is the difference between the two new bond prices (in absolute $)? 2+ decima Submit

Intro A corporate bond has 2 years to maturity, a coupon rate of 8%, a face value of $1,000 and pays coupons semiannually. The market interest rate for similar bonds is 0.095. Part 1 What is the price of the bond (in $)? 977.44 Correct ✓ Attempt 1/10 for 10 pts. Since market interest rates (or yields or yield to maturity), are quoted as bond equivalent yields (a type of APR), we need to divide the quoted rate by 2: Period rate: 0.095 = 0.0475 2 The 6-monthly interest payment, or coupon, is: Coupon rate 0.08 Coupon = Face value= 2 21,000 = 40 Bond price: Coupon Par value Р T + r (1+r) (1+r)* 40 0.0475 1 1,000 4+ (1+0.0475) (1+0.0475) = 973.25 Part 2 What is the bond's duration? 2+ decima Submit Part 3 Attempt 2/10 for 9.5 pts. Attempt 1/10 for 10 pts. If yields fall by 0.8 percentage points, what is the new expected bond price based on its duration (in $)? 0+ decima Submit Part 4 Attempt 1/10 for 10 pts. What is the actual bond price after the change in yields (in $)? 0+ decima Submit Part 5 Attempt 1/10 for 10 pts. What is the difference between the two new bond prices (in absolute $)? 2+ decima Submit

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter4: Bond Valuation

Section: Chapter Questions

Problem 7P: Bond Valuation with Semiannual Payments Renfro Rentals has issued bonds that have a 10% coupon rate,...

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Bond Valuation with Semiannual Payments Renfro Rentals has issued bonds that have a 10% coupon rate, payable semiannually. The bonds mature in 8 years, have a face value of $1,000, and a yield to maturity of 8.5%. What is the price of the bonds?
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