Question

Purchase Government bond which currently trades at TZS 850 with 10% annual coupon rate. The bond was issued on 12nd January 2pe you Required o What is the price of Bond. (2) Profitability index (3) And other Glaulation that is relevant

0 0
Add a comment Improve this question Transcribed image text
Answer #1

2. Profitability index= Present value of future cash flows-initial investment

From step 1, we have found the bond price to be 971.27 TZSBond pice= Cx T-(I+t) Cltr) F = 850. C= 101. = 850x10:1- =85 r/YTM=8.5% 85x81-(1+ 0:085)- 850 %3D n= 20 20 Price (1+0.085)²

therefore PI=971.27-850=1.14

profitability index which is <= 1 is considered acceptable

Add a comment
Know the answer?
Add Answer to:
Purchase Government bond which currently trades at TZS 850 with 10% annual coupon rate. The bond...
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for? Ask your own homework help question. Our experts will answer your question WITHIN MINUTES for Free.
Similar Homework Help Questions
  • Question 29 (1 point) A bond currently trades at $995 on the secondary market. The bond...

    Question 29 (1 point) A bond currently trades at $995 on the secondary market. The bond has 7 years until maturity and pays an annual coupon at 6% of face value. The face value of the bond is $1,000. What is the coupon (or current) yield for this bond? (Enter your answers as a decimal rounded to 4 decimal places, not a percentage. For example, enter 0.0843 instead of 8.43%) Your Answer: Answer DView hint for Question 29 Question 30...

  • What is the value of a bond that has an annual coupon of 12%, a maturity...

    What is the value of a bond that has an annual coupon of 12%, a maturity of 5 years and the market yield is currently at 8%? What is the value of a bond that has an annual coupon of 7%, a maturity of 10 years and the market yield is currently at 8%? What is the value of a bond that has an annual coupon of 8%, a maturity of 15 years and the market yield is currently at...

  • A $1,000 par bond with a 4% semi-annual coupon has 10 years to maturity trades at...

    A $1,000 par bond with a 4% semi-annual coupon has 10 years to maturity trades at a yield of 6%. What would be it’s price? A. $851.23 B. $922.58 C. $1,148.77 D. $541.20

  • 1. An investor purchases an annual coupon bond with a 6% coupon rate and exactly 20...

    1. An investor purchases an annual coupon bond with a 6% coupon rate and exactly 20 years remaining until maturity at a price equal to par value. The investor’s investment horizon is eight years. The approximate modified duration of the bond is 11.470 years. What is the duration gap at the time of purchase? (Hint: use approximate Macaulay duration to calculate the duration gap) 2. An investor plans to retire in 10 years. As part of the retirement portfolio, the...

  • A) You are considering the purchase of a $1,000 par value bond with a coupon rate...

    A) You are considering the purchase of a $1,000 par value bond with a coupon rate of 5​% (with interest paid​ semiannually) that matures in 12 years. If the bond is priced to yield 9​%, what is the​ bond's current​ price? The​ bond's current price is ​$__ B) Compute the current yield of​ a(n) 8.5​%, 25​-year bond that is currently priced in the market at ​$1,200. Use annual compounding to find the promised yield on this bond. Repeat the promised...

  • Assume that you are considering the purchase of a 10-year, noncallable bond with an annual coupon...

    Assume that you are considering the purchase of a 10-year, noncallable bond with an annual coupon rate of 9.0%. The bond has a face value of $1,000, and it makes semiannual coupon payments. If you require an 8.5% nominal yield to maturity on this investment, what is the maximum price you should be willing to pay for the bond?

  • You are considering the purchase of a 40-year original maturity, semi-annual coupon bond that was issued...

    You are considering the purchase of a 40-year original maturity, semi-annual coupon bond that was issued 12 years ago. The bond presently has an annual yield to maturity of 12 percent. If the bond’s current market value is $1,186.99, what is the bond’s annual coupon rate?

  • You own a bond that has a 6% annual coupon rate and matures 5 years from...

    You own a bond that has a 6% annual coupon rate and matures 5 years from now. You purchased this 10-year bond at par value when it was originally issued. Which one of the following statements applies to this bond if the relevant market interest rate is now 5.8% (yield to maturity)? You purchase a bond with a coupon rate of 6.25% and a par value of $1,000. There are 53 days to the next semiannual coupon payment date and...

  • ABC issued 12-year bonds at a coupon rate of 8% with semi-annual payments. If the bond...

    ABC issued 12-year bonds at a coupon rate of 8% with semi-annual payments. If the bond currently sells for $1050 of par value, what is the YTM? ABC issued 12-year bonds 2 years ago at a coupon rate of 8% with semi-annual payments. If the bond currently sells for 105% of par value, what is the YTM? A bond has a quoted price of $1,080.42. It has a face value of $1000, a semi-annual coupon of $30, and a maturity...

  • A $1,000 par bond with a 4% semi-annual coupon has 15 years to maturity trades at...

    A $1,000 par bond with a 4% semi-annual coupon has 15 years to maturity trades at a yield of 6%. What would be it’s price? A. $987.44 B. $805.76 C. $1,195.99 D. $804.00

ADVERTISEMENT
Free Homework Help App
Download From Google Play
Scan Your Homework
to Get Instant Free Answers
Need Online Homework Help?
Ask a Question
Get Answers For Free
Most questions answered within 3 hours.
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT