a | Current Price of bond | |||||
Current Price =Present Value of future cash flows | ||||||
Yield to maturity=8% | ||||||
Number of Years =25 | ||||||
From Table 16-2 | ||||||
Current Market Price | $1,429.64 | |||||
b | Dollar Profit | |||||
A | Investment | $406.00 | (1015*40%) | |||
E | Selling Price | $1,429.64 | ||||
F | Payment of Loan=(1015-406) | $609.00 | ||||
G=E-F-A | Dollar Profit | $414.64 | ||||
c | Amount of purchase price paid in cash | $406.00 | (1015*40%) | |||
d | Return on Cash investment | |||||
Percentage Return =414.64/406.00= | 102.13% | |||||
A $1,000 par value bond was issued 25 years ago at a 12 percent coupon rate....
A $1,000 par value bond was issued 25 years ago at a 12 percent coupon rate. It currently has 15 years remaining to maturity. Interest rates on similar obligations are now 8 percent. Assume Ms. Bright bought the bond three years ago when it had a price of $1,050. Further assume Ms. Bright paid 30 percent of the purchase price in cash and borrowed the rest (known as buying on margin). She used the interest payments from the bond to...
2. A $1,000 par value bond was issued 15 years ago at a 12 percent coupon rate. It currently has 25 years remaining to maturity. Interest rates on similar obligations are now 10 percent. Assume Ms. Bright bought the bond three years ago when it had a price of $1,025. Further assume Ms. Bright paid 20 percent of the purchase price in cash and borrowed the rest (known as buying on margin). She used the interest payments from the bond...
A $1,000 par value bond was issued 25 years ago at a 12 percent coupon rate. It currently has 15 years remaining to maturity. Interest rates on similar obligations are now 8 percent. Assume Ms. Bright bought the bond three years ago when it had a price of $1,050 Further assume Ms. Bright paid 30 percent of the purchase price in cash and borrowed the rest (known as buying on margin). She used the interest payments from the bond to...
A $1,000 par value bond was issued 15 years ago at a 12 percent coupon rate. It currently has 25 years remaining to maturity. Interest rates on similar obligations are now 10 percent. Assume Ms. Bright bought the bond three years ago when it had a price of $1,025. Further assume Ms. Bright paid 20 percent of the purchase price in cash and borrowed the rest (known as buying on margin). She used the interest payments from the bond to...
A $1,000 par value bond was issued 25 years ago at a 12 percent coupon rate. It currently has 15 years remaining to maturity. Interest rates on similar obligations are now 10 percent. Assume Ms. Bright bought the bond three years ago when it had a price of $1,050. Further assume Ms. Bright paid 30 percent of the purchase price in cash and borrowed the rest (known as buying on margin). She used the interest payments from the bond to...
A $1,000 par value bond was issued five years ago at a 6 percent coupon rate. It currently has 20 years remaining to maturity. Interest rates on similar debt obligations are now 8 percent. Use Appendix B and Appendix D for an approximate answer but calculate your final answer using the formula and financial calculator methods. a. Compute the current price of the bond using an assumption of semiannual payments. (Do not round intermediate calculations and round your answer to...
A $1,000 par value bond was issued five years ago at a 10 percent coupon rate. It currently has 20 years remaining to maturity. Interest rates on similar debt obligations are now 12 percent. Use Appendix Band Appendix D for ar approximate answer but calculate your final answer using the formula and financial calculator methods. a. Compute the current price of the bond using an assumption of semiannual payments. (Do not round intermediate calculations and round your answer to 2...
Exercise 15 - Profit potential associated with margin A $1,000 par value bond was issued 25 years ago at a 12 percent coupon rate. It currently has 15 years remaining to maturity. Interest rates on similar obligations are now 8 percent. a. What is the current price of the bond? b. Assume Ms. Bright bought the bond three years ago when it had a price of $1,050. What is her dollar profit based on the bond’s current price? c. Further...
A $1,000 par value bond was issued five years ago at a coupon rate of 10 percent. It currently has 10 years remaining to maturity. Interest rates on similar debt obligations are now 12 percent. Use Appendix B and Appendix D for an approximate answer but calculate your final answer using the formula and financial calculator methods a. Compute the current price of the bond using an assumption of semiannual payments. (Do not round intermediate calculations and round your answer...
Twenty-five-year B-rated bonds of Parker Optical Company were initially issued at a 12 percent yield. After 24 years the bonds have been upgraded to Aa2. Such bonds are currently yielding 10 percent to maturity. Use Table 16-2. Determine the price of the bonds with 1 years remaining to maturity. Price of the bonds Table 16-2 Interest rates and bond prices (face value is $1,000 and annual coupon rate is 12%) A B с D E F G H Rate in...