Charlotte's Clothing issued a 5 percent bond with a maturity date of 15 years. Five years have passed and the bond is selling for $690. Assume that the bond pays interest annually.
What is the current yield? Round your answer to two decimal places.
%
What is the yield to maturity? Use Appendix B and Appendix D to answer the question. Round your answer to the nearest whole number.
%
If three years later the yield to maturity is 10 percent, what will be the price of the bond? Use Appendix B and Appendix D to answer the question. Round your answer to the nearest dollar. $
Appendix B
Appendix D
a
current yield = coupon rate*par value/current price |
Current yield%=(5/100)*1000/690 |
Current yield% = 7.25 |
b
K = N |
Bond Price =∑ [(Annual Coupon)/(1 + YTM)^k] + Par value/(1 + YTM)^N |
k=1 |
K =10 |
690 =∑ [(5*1000/100)/(1 + YTM/100)^k] + 1000/(1 + YTM/100)^10 |
k=1 |
YTM% = 10 |
c
K = N |
Bond Price =∑ [(Annual Coupon)/(1 + YTM)^k] + Par value/(1 + YTM)^N |
k=1 |
K =7 |
Bond Price =∑ [(5*1000/100)/(1 + 10/100)^k] + 1000/(1 + 10/100)^7 |
k=1 |
Bond Price = 757 |
Charlotte's Clothing issued a 5 percent bond with a maturity date of 15 years. Five years...
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A $1,000 bond has a 7.5 percent coupon and matures after nine
years. If current interest rates are 9 percent, what should be the
price of the bond? Assume that the bond pays interest annually. Use
Appendix B and Appendix D to answer the question. Round your answer
to the nearest dollar.
$
If after five years interest rates are still 9 percent, what
should be the price of the bond? Use Appendix B and Appendix D to
answer the...
Tom Cruise Lines Inc. issued bonds five years ago at $1,000 per bond. These bonds had a 30-year life when issued and the annual interest payment was then 14 percent. This return was in line with the required returns by bondholders at that point as described below: Real rate of return Inflation premium Risk premium 3% 6 5 14% Total return Assume that five years later the inflation premium is only 2 percent and is appropriately reflected in the required...
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A $1,000 bond has a coupon of 9 percent and matures after eight
years. Assume that the bond pays interest annually.
What would be the bond's price if comparable debt yields 10
percent? Use Appendix B and Appendix D to answer the question.
Round your answer to the nearest dollar.
$
What would be the price if comparable debt yields 10 percent and
the bond matures after four years? Use Appendix B and Appendix D to
answer the question. Round...
Tom Cruise Lines Inc. issued bonds five years ago at $1,000 per bond. These bonds had a 25-year life when issued and the annual interest payment was then 14 percent. This return was in line with the required returns by bondholders at that point as described below: Real rate of return 3 % Inflation premium 6 Risk premium 5 Total return 14 % Assume that five years later the inflation premium is only 3 percent and is appropriately reflected in...
An investor purchases a bond for $949. The bond pays $70 a year
for three years and then matures (it is redeemed for $1,000). What
is the internal rate of return on that investment? Use Appendix B
and Appendix D to answer the question. Round your answer to the
nearest whole number.
The internal rate of return on a bond is %.
This return can be also called as current yield/yield to
maturity/yield to call.
Appendix B
Appendix D
Tom Cruise Lines Inc. issued bonds five years ago at $1,000 per bond. These bonds had a 25-year life when issued and the annual interest payment was then 15 percent. This return was in line with the required returns by bondholders at that point as described below: 5% Real rate of return Inflation premium Risk premium Total return 15% Assume that five years later the inflation premium is only 3 percent and is appropriately reflected in the required return (or...
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Tom Cruise Lines Inc. issued bonds five years ago at $1,000 per bond. These bonds had a 30-year life when issued and the annual interest payment was then 15 percent. This return was in line with the required returns by bondholders at that point as described below: Real rate of return 5 % Inflation premium 6 Risk premium 4 Total return 15 % Assume that five years later the inflation premium is only 2 percent and is...