Calculating BOnd Price at YTM = 9%
Price = 80/0.09 = $888.89
Calculating BOnd Price at YTM = 8%
Price = 80/0.08 = $1,000
Calculating BOnd Price at YTM = 10%
Price = 80/0.10 = $800
Perpetuities. The Canadian Government has once again decided to issue a consol (a bond with a...
Perpetuities. The Canadian Government has once again decided to issue a consol (a bond with a never-ending interest payment and no maturity date). The bond will pay $50 in interest each year (at the end of the year), but it will never return the principal. The current discount rate for Canadian government bonds is 7%. What should this consol bond sell for in the market? What if the interest rate should fall to 6%? Rise to 8%? Why does the...
Perpetuities. The Canadian Government has once again decided to issue a consol (a bond with a never-ending interest payment and no maturity date). The bond will pay $70 in interest each year (at the end of the year), but it will never return the principal. A) If the current discount rate for Canadian government bonds is 10%, what should this bond sell for in the market? B) If the current discount rate for Canadian government bands would rise to 11%?...
The Canadian Government has once again decided to issue a consol (a bond with a never ending interest payment and no maturity date). The bond will pay $80 in interest each year (at the end of the year), but it will never return the principal. The current discount rate for Canadian government bonds is 7%. What should this consol bond sell for in the market?
14) b) The British government has consol bonds (perpetuities) outstanding that pay £100 per year, forever. Assume that the current discount rate is 4%. What is the value of the bond today in £, if the last payment was made yesterday? What is the value of the bond today in £, if you will receive the first payment today? Assume an ordinary perpetuity. If this consol trades in the market today at £2,480, what rate of return will an investor...
8) The British government has consol bonds (perpetuities) outstanding that pay £100 per year forever. Assume that the current discount rate is 4% a) What is the value of the bond today in £? b) If this consol trades in the market today at £2,480, what rate of return will an investor earn from this investment? 9) The Elysian Trust has set up a program that provides free school education for underprivileged children in India and Nepal. The Elysian...
Zenith Corporation has a 5% $1,000,000 bond issue with a maturity of 12 years. Due to a sudden surge in inflation due to our national debt, the market rate of interest is currently 7%. Interest is paid semi-annually. Show work! Will the bond be sold at a “premium”, “par”, or “discount”? What will be the price and the proceeds? 2) Four years after the original issue (#1 above), with 8 years remaining on the original bond, all banks are taken...
1. Zenith Corporation has a 5% $1,000,000 bond issue with a maturity of 12 years. Due to a sudden surge in inflation due to our national debt, the market rate of interest is currently 7%. Interest is paid semi-annually. Show work! a. Will the bond be sold at a “premium”, “par”, or “discount”? b. What will be the price and the proceeds? 2. Four years after the original issue (#1 above), with 8 years remaining on the original bond, all...
Four years after the original issue (#1 above), with 8 years remaining on the original bond, all banks are taken over the federal government and the current market rate of interest for all “new” bonds will be 3% (market rate of interest) and the current owner decides to sell the bond and move to Australia which has a stronger form of capitalism. Will the bond be sold at a “premium”, “par”, or “discount”? What will be the price and the...
QUESTION 15 A coupon bond pays the owner of the bond - the same amount every other month until maturity date and part of the par at maturity. a only a fixed interest payment every period. O a fixed periodic interest payment over the life of the bond and the par value at maturity date. only a final coupon payment plus a par value at maturity. QUESTION 16 How does a decline in the value of the Canadian dollar affect...
9. The British government has a consol bond outstanding paying £200 per year forever. Assume the current interest rate is 12% per year a. What is the value of the bond immediately after a payment is made? b. What is the value of the bond immediately before a payment is made? a. What is the value of the bond immediately after a payment is made? The value of the bond immediately after a payment is made is The Value of...