ZuoTi.Pro
Question

What is the most we should pay for a bond with a par value of $1000,...

What is the most we should pay for a bond with a par value of $1000, coupon rate of 7.3% paid annually, and a remaining life of 26 years? The yield to maturity is 10.0%. Assume annual discounting. (Round your answer to the nearest penny.)

business   finance   
0 0
Add a comment Improve this question Transcribed image text
Next > < Previous
Sort answers by oldest

Homework Answers

Answer #1

Annual coupon=1000*7.3%=73

Hence current price=Annual coupon*Present value of annuity factor(10%,26)+$1000*Present value of discounting factor(10%,26)

=73*9.16094547+1000*0.0839054529

=$752.65(Approx).

NOTE:

1.Present value of annuity=Annuity[1-(1+interest rate)^-time period]/rate

=73[1-(1.1)^-26]/0.1

=73*9.16094547

2.Present value of discounting factor=1000/1.1^26

=1000*0.0839054529

0 0
Add a comment
Know the answer?
Add Answer to:
What is the most we should pay for a bond with a par value of $1000,...
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

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

  • What is the most we should pay for a bond with a par value of $1000,...

    What is the most we should pay for a bond with a par value of $1000, coupon rate of 5.2% paid semi-annually, and a remaining life of 18 years? The bond is rated BBB, with a yield to maturity of 5.9%. (Round your answer to the nearest penny.)

  • A bond that matures in 13 years has a ​$1000 par value. The annual coupon interest...

    A bond that matures in 13 years has a ​$1000 par value. The annual coupon interest rate is 9 percent and the​ market's required yield to maturity on a​ comparable-risk bond is 12 percent. What would be the value of this bond if it paid interest​ annually? What would be the value of this bond if it paid interest​ semiannually? a.  The value of this bond if it paid interest annually would be ​$ nothing. ​ (Round to the nearest​...

  • (1) (Bond Valuation) a bond that matures in 9 years has a $1000 par value. the...

    (1) (Bond Valuation) a bond that matures in 9 years has a $1000 par value. the annual coupon interest rate is 14% and the markets required yield to maturity on a comparable risk-bond is 16%. what would be the value of this bond if it paid interest annually? what would be the vale of this bond if it paid interest semi-annually? (2) (yield to maturity) the market price is $850 for a 12-year bond ($1000 par value) that pays 9%...

  • Compute the current yield on a bond with a yield to maturity of 13.6%, a par...

    Compute the current yield on a bond with a yield to maturity of 13.6%, a par value of $1000, a coupon rate of 6.7% paid semi-annually, a remaining life of 17 years? (Round to 100th of a percent and enter as a percentage, e.g. 12.34% as 12.34 and state as an annual rate.)

  • 1. What is the current price of a $1000 par value bond if has 12.5 years...

    1. What is the current price of a $1000 par value bond if has 12.5 years until maturity, a YTM of 6.6%, and a coupon rate of 6% with semi-annual coupon payments? 2.The bonds of Lapeer Airlines, Inc., are currently trading on the market at $1,119.34. They have a par value of $1000, make semi-annual coupon payments with a coupon rate of 6.4%, and a YTM of 4.6%. How many years until these bonds mature? 3.You have decided to try...

  • A $1000 par value bond has a coupon rate of 7.8%, pays interest semi-annually, matures in...

    A $1000 par value bond has a coupon rate of 7.8%, pays interest semi-annually, matures in 26 years, and is priced at a 58.28 discount from par value. What is the annual yield to maturity of this bond? (Answer to the nearest one hundedth of a percent, i.e., 1.23 but do not include the % sign).

  • What should the price of a bond be that has a par value of 1000 dollars,...

    What should the price of a bond be that has a par value of 1000 dollars, an annual coupon of 35 dollars, a rate of 4% and a maturity of 10 yrs? Round your answer to the nearest hundredth.

  • Assume a par value of $1,000. Caspian Sea plans to issue a 13.00 year, annual pay...

    Assume a par value of $1,000. Caspian Sea plans to issue a 13.00 year, annual pay bond that has a coupon rate of 7.93%. If the yield to maturity for the bond is 8.26%, what will the price of the bond be? Assume a par value of $1,000. Caspian Sea plans to issue a 26.00 year, annual pay bond that has a coupon rate of 10.00%. If the yield to maturity for the bond is 10.0%, what will the price...

  • A bond that matures in 15 years has a $1000 par value. The annual coupon interest...

    A bond that matures in 15 years has a $1000 par value. The annual coupon interest rate is 8 percent and the market's required yield to maturity on a comparable-risk bond is 15 percent. What would be the value of this bond if it paid interest annually? What would be the value of this bond if it paid interest semiannually?

  • A bond that matures in 17 years has a ​$1000 par value. The annual coupon interest...

    A bond that matures in 17 years has a ​$1000 par value. The annual coupon interest rate is 15 percent and the​ market's required yield to maturity on a​ comparable-risk bond is 14 percent. What would be the value of this bond if it paid interest​ annually? What would be the value of this bond if it paid interest​ semiannually? Question 7-3

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