CASE 1: ASSUMING 8% IS ANNUAL COUPON RATE
Using financial calculator
Step 1: Reinvested coupons value
N=10*2=20
PMT=-8%*1000/2=-40
I/Y=6%/2=3%
PV=0
CPT FV=1074.81
Step 2: Find yield
N=10*2
FV=1074.81+1000=2074.81
PMT=0
PV=-900
CPT I/Y=4.265%
Hence, yield=4.265%*2=8.53%
CASE 2: ASSUMING 8% IS SEMIANNUAL COUPON RATE
Using financial calculator
Step 1: Reinvested coupons value
N=10*2=20
PMT=-8%*1000=-80
I/Y=6%/2=3%
PV=0
CPT FV=2149.6300
Step 2: Find yield
N=10*2
FV=2149.63+1000=3149.63
PMT=0
PV=-900
CPT I/Y=6.46%
Hence, yield=6.46%*2=12.93%
4.1.5 Don purchases a 1000 par value 10-year bond with 8% semiannual coupons for 900. He...
Dave purchased a 10-year par value bond with semiannual coupons at a nominal annual rate of 4% convertible semiannually at a price of 1021.50. The bond can be called at par value F on any coupon date starting at the end of year 5. The price guarantees that Dave will receive a nominal annual rate of interest convertible semiannually of at least 6%. Determine whether the bond was bought at par, at a discount, or at a premium. at a...
7. Problem 7: 1. A $1,000 par value ten-year 8% bond has semiannual coupons. The redemption value equals the par value. The bond is purchased at a premium to yield 6% convertible semiannually. What is the amount for amortization of the premium in the tenth coupon? 2. A ten-year 5% bond with semiannual coupons is purchased to yield 6% compounded semiannually. The par value and redemption value are both $1,000. What is the book value of the bond six years...
15. A 10-year 1000 par value bond was purchased to yield 6% convertible semiannually. The bond has a bucoupon rate of 4% and pays semiannual coupons. The bond investor reinvests the coupons into an account paying a nominal annual rate of 8% convertible semiannually. Find the overall yield earned by the bond investor over the life of the bond, expressed as an effective annual rate. (A) 6.1% (B) 6.2% (C) 6.3% (D) 6.4% (E) 6.5%
QUESTION 8 (16 marks) (a) [5 marks] John purchases a $1000 face value 10-year bond with coupons of 8% per annum paid half-yearly. The bond will be redeemed at C. The purchase price is $800 and the exact present value of the redemption amount C is $301.5116. Calculate the redemption amount C, and state if the bond is redeemed at par, discount or premium. (Hint: a at 3% is 14.87747 ag at 4% is 13.59033, a at 5 % is...
5. A 30-year 1000 par value bond with coupons at 9% payable semiannually and a redemption value of 1100 is purchased for a price that results in a yield of 12% compounded semiannually. Suppose that the bond is called (i.e. redeemed) prior to the actual maturity date and results in an actual nominal yield rate convertible semiannually of 14%. Note: Assume that the bond is called immediately after a coupon payment is made. Calculate the number of years the bond...
Suppose that a 9-year bond with a face value of 1000 dollars pays semiannual coupons at a rate of 5.2 percent per half year. The issuer of the bond has the option to redeem it at the time of the 16th coupon for 2100 dollars, or at maturity for 2000 dollars. Find the price that will guarantee an investor a yield rate of at least 12.3 percent convertible semiannually, regardless of when the bond is redeemed.
Suppose that a 9-year bond with a face value of 1000 dollars pays semiannual coupons at a rate of 5.5 percent per half year. The issuer of the bond has the option to redeem it at the time of the 16th coupon for 2100 dollars, or at maturity for 2000 dollars. Find the price that will guarantee an investor a yield rate of at least 12.1 percent convertible semiannually, regardless of when the bond is redeemed.
A 1000 par-value 15-year bond has semiannual coupons of 60 each. This bond is callable at any of the last 10 coupon dates. Find the price an investor should pay to guarantee a nominal yield rate (compounded semi-annually) of (a) 14%; (b) 10%; (c) 12%.
Jackson purchases a 10-year 1000 par bond with 8% annual coupons for L to yield 9% annually. Six years later, after the coupon, he sells the bond for G when annual yields are 7%. Find L – G without excel.
A coupon bond with a par value of $1,000 and a 10-year maturity pays semiannual coupons of $21. (a) Suppose the yield for this bond is 4% per year compounded semiannually. What is the price of the bond? (b) Is the bond selling above or below par value? Why?