14.A company has 5-year bonds outstanding that pay an 7.5 percent coupon rate. Investors buying the bond today can expect to earn a yield to maturity of 14.4 percent p.a.. What should the company's bonds be priced at today? Assume annual coupon payments and a face value of $1000. (Rounded to the nearest dollar)
Select one:
a. $765
b. $1279
c. $638
d. $1959
15.Jack is planning to buy a 9-year bond with semi-annual coupons and a coupon rate of 4.3 percent p.a. The face value is $1,000. Given an annual yield of 6.4 percent, what is the bond’s current price? (to the nearest cent)
Select one:
a. $858.00
b. $1154.03
c. $572.17
d. $859.62
16.Which ONE of the following statements is NOT true?
Select one:
A. Long-term bonds have lower price volatility than short-term bonds.
B. As interest rates decline, the prices of bonds increase; and as interest rates rise, the prices of bonds decline.
C. All other things being equal, short-term bonds are less risky than long-term bonds.
D. Interest rate risk increases as maturity increases.
17.Jill wants to buy 5-year zero coupon bonds with a face value of $1,000. Her required return on the bonds is 6.9 percent p.a. Assuming annual compounding, what would Jill be prepared to pay for the bond? ( to the nearest cent )
Select one:
a. $979.44
b. $1020.83
c. $716.33
d. $847.89
Answer 14:
Correct answer is:
a. $765
Explanation:
Par value = $1,000
Annual coupon amount = 1000 * 7.5% = $75
Time to maturity = 5 years
Price of bond now = PV (rate, nper, pmt, fv, type) = PV (14.4%, 5, -75, -1000, 0) = $765
Option a is correct and other options b, c and d are incorrect.
Answer 15:
Correct answer is:
a. $858.00
Explanation:
Par value = $1,000
Semiannual coupon amount = 1000 * 4.3% = $21.50
Time to maturity in semiannual periods = 9 * 2 = 18
Price of bond now = PV (rate, nper, pmt, fv, type) = PV (6.4%/2, 18, -21.50, -1000, 0) = $858.00
Option a is correct and other options b, c and d are incorrect.
Answer 16:
Correct answer is:
A. Long-term bonds have lower price volatility than short-term bonds.
Explanation:
Price volatility is equal to yield times its duration. So higher the duration higher the price volatility. The statement A is incorrect.
The other 3 statements are correct.
As interest rates decline, the prices of bonds increase; and as interest rates rise, the prices of bonds decline.
All other things being equal, short-term bonds are less risky than long-term bonds.
Interest rate risk increases as maturity increases.
Option a is correct and other options b, c and d are incorrect.
Answer 17:
Correct answer is:
c. $716.33
Explanation:
PV = FV / (1 + Periodic interest rate) ^Number of periods
Price Jill be prepared to pay for the bond = PV = 1000 / (1 + 6.9%) ^5 = $716.33
Option c is correct and other options a, b and d are incorrect.
14.A company has 5-year bonds outstanding that pay an 7.5 percent coupon rate. Investors buying the...
Regatta Inc. has seven-year bonds outstanding that pay a 12 percent coupon rate. Investors buying these bonds today can expect to earn a yield to maturity of 8.875 percent. What is the current value of these bonds? Assume annual coupon payments.
An investor has two bonds in his portfolio that have a face value of $1,000 and pay an 11% annual coupon. Bond L matures in 20 years, while Bond S matures in 1 year. Assume that only one more interest payment is to be made on Bond S at its maturity and that 20 more payments are to be made on Bond L. What will the value of the Bond L be if the going interest rate is 5%? Round...
An investor has two bonds in his portfolio that have a face value of $1,000 and pay a 9% annual coupon. Bond L matures in 13 years, while Bond S matures in 1 year. Assume that only one more interest payment is to be made on Bond S at its maturity and that 13 more payments are to be made on Bond L. What will the value of the Bond L be if the going interest rate is 5%? Round...
Consider three bonds with 5.80% coupon rates, all making annual coupon payments and all selling at face value. The short-term bond has a maturity of 4 years, the intermediate-term bond has a maturity of 8 years, and the long-term bond has a maturity of 30 years, a. What will be the price of the 4-year bond if its yield increases to 6.80%? (Do not round intermediate calculations. Round your answer to 2 decimal places.) b. What will be the price...
#5 An investor has two bonds in his portfolio that have a face value of $1,000 and pay a 7% annual coupon. Bond L matures in 17 years, while Bond S matures in 1 year Assume that only one more interest payment is to be made on Bond S at its maturity and that 17 more payments are to be made on Bond L. a. What will the value of the Bond L be if the going interest rate is...
What is the price of a 5-year, 7.5 % coupon rate, $1,000 face value bond that pays interest quarterly if the yield to maturity on similar bonds is 11.6% ? The price of the bond is $_____. (Round to the nearest cent.)
Question 4 Jack is planning to buy a 4-year bond with semi-annual coupons and a coupon rate of 4.2 percent p.a. The face value is $1,000. Given an annual yield of 10.5 percent, what is the bond’s current price? (to the nearest cent) Select one: a. $798.45 b. $802.44 c. $1227.61 d. $670.73
JJ Markets has 8 percent coupon bonds outstanding that mature in 11 years. The bonds pay interest semiannually. What is the market price per bond if the face value is $1,000 and the yield to maturity is 9 percent?
Roadside Markets has 8.82 percent coupon bonds outstanding that mature in 11 years. The bonds pay interest semiannually. What is the market price per bond if the face value is $1,000 and the yield to maturity is 7.2 percent?
(Bond valuation) Enterprise, Inc. bonds have an annual coupon rate of 15 percent. The interest is paid semiannually and the bonds mature in 12 years. Their par value is $1,000. If the market's required yield to maturity on a comparable-risk bond is 12 percent, what is the value of the bond? What is its value if the interest is paid annually? a. The value of the Enterprise bonds if the interest is paid semiannually is $ _______ . (Round to the...