Question 1: A $1,010 face value bond is selling in the market place for $934. It matures in 3 years. If keep to maturity, what is the bond's yield to maturity?
Question 2: A banker must earn at least a 2.7% return after expected inflation on short term loans. The inflation rate for the past 6 months has averaged 3.5%. The expected inflation rate for the next twelve months is 7.3%. Nominal interest rates for short term loans were 7.1% last month. What is the minimum nominal interest rate that he should charge for a one year loan?
Question 3: Fred bought a $1000 face value bond issued by Zest Corporation for $1200. The bond matures in 2020 and pays him an annual interest payment of $70. What is Fred's current yield with this bond?
Question 4: A year ago, you purchased a $1000 face value bond for $1,006. A year later you sold the bond for $989 after receiving a coupon payment of $49. What was your rate of capital gain?
Question 5: You need to determine the market value of a $5,000 face value bond maturing in 5 years. The market yield for this type of bond is 4.7%. What is its market value?
(Question 1)
If yield-to-maturity (YTM) is R%, then
Current price x (1 + R)Years to maturity = Face value
$934 x (1 + R)3 = $1,010
(1 + R)3 = $1,010 / $934
(1 + R)3 = 1.0814
Taking cube root,
1 + R = 1.0264
R = 0.0264
R = 2.64%
NOTE: As per Answering Policy, 1st question is answered.
Question 1: A $1,010 face value bond is selling in the market place for $934. It...
Question 1: A banker must earn at least a 2.7% return after expected inflation on short term loans. The inflation rate for the past 6 months has averaged 3.5%. The expected inflation rate for the next twelve months is 7.3%. Nominal interest rates for short term loans were 7.1% last month. What is the minimum nominal interest rate that he should charge for a one year loan? Question 2: Fred bought a $1000 face value bond issued by Zest Corporation...
1) You need to determine the market value of a $1,000 face value bond maturing in 5 years. The market yield (interest rate) for this type of bond is 3.1%. What is its market value? (Round to the nearest penny). 2) A year ago, you purchased a $1,000 face value bond for $1024. A year later you sold the bond for $1,007 after receiving a coupon payment of $55. What was your rate of capital gain? (Answer in tenth of...
1) You need to determine the market value of a $1,000 face value bond maturing in 5 years. The market yield (interest rate) for this type of bond is 3.1%. What is its market value? (Round to the nearest penny). 2) A year ago, you purchased a $1,000 face value bond for $1024. A year later you sold the bond for $1,007 after receiving a coupon payment of $55. What was your rate of capital gain? (Answer in tenth of...
Question 3 (4 points) A bond with a $1000 face value and an 4 percent coupon pays interest semiannually. The bond will mature in 20 years. The nominal yield to maturity is 14 percent. What is its value? If the market rate (yield) on a bond is less than its coupon rate (and remains that way), the value of that bond will always be below its par value until the bond matures, when its value will equal par.
3) A $1,060 face value bond is selling in the market place for $927. It matures in 3 years. If keep to maturity, what is the bond's yield to maturity? (Round to the nearest thousands and convert to a percentage).
A Treasury bond with a face(or promised) value of $1000 sold in the market for $1287.19 yesterday. at this price, the yield to maturity (ytm) was 2.43%. the bond's coupon rate is 6.75% and matures in 2026. Why would anyone in his/her sound mind buy this bond for $1287 only to be paid $1000 at maturity but many people did? explain why?
A bond has a $1,000 face value and a $1,146 market value. The bond pays interest semi-annually, has a yield-to-maturity of 7.47 percent, and matures in 10 years. What is the current yield?
4) Fred bought a $1,000 face value bond issued by Zest Corporation for $1,200. The bond matures in 2020 and pays him an annual interest payment of $55. What is the bond's coupon rate? (Round to the nearest thousands place of a percent i.e. 0.037 is 3.7%)
A zero coupon bond has a face value of $1,000 and matures in 6 years. Investors require a(n) 7.2 % annual return on these bonds. What should be the selling price of the bond? If the nominal rate of interest is 12.21 % and the real rate of interest is 8.76 % what is the expected rate of inflation? A Ford Motor Co. coupon bond has a coupon rate of 6.75%, and pays annual coupons. The next coupon is due...
Question 15 1 pts A $1,000 face value bond currently has a yield to maturity of 6.69%. The bond matures in three years and pays interest annually. The coupon rate of the bond is 7.00%. What is the current price of this bond? $823.43 $1,008.18 $1,000.00 $991.86