Homework Answers
This statement is false because bond price and rate of interest are inversely related. If the rate of interest is decreased to 5.5 % from 6%, investors when look for more bonds because interest bearing assets are now less attractive. Demand for bonds increases which increases their prices well.
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A bond with no expiration date is priced at $10,000 when the interest rate in the...
. Example: A bond was issued several years ago at par when the interest rate was...
. Example: A bond was issued several years ago at par when the interest rate was 7 %, which was also its coupon rate (annual payment). Now, with three years left in t he bond's life, the interest rate is 8% per year. . What is the bond's price? . In another year, after the next coupon is paid and the remaining maturity falls to tw o years, how much would the bond be sold at? . What is the...
A bond has a Macaulay duration of 9.50 and is priced to yield 7.5%. If interest...
A bond has a Macaulay duration of 9.50 and is priced to yield 7.5%. If interest rates go up so that the yield goes to 8.0%, what will be the percentage change in the price of the bond? Now, if the yield on this bond goes down to 7%, what will be the bond's percentage change in price? Comment on your findings. If interest rates go up to 8.0%, the percentage change in the price of the bond is %....
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...
Leann just sold a $10,000 par value bond for $9,800. The bond interest rate was 5.5%...
Leann just sold a $10,000 par value bond for $9,800. The bond interest rate was 5.5% per year payable quarterly. Leann owned the bond for 3 years. The 1st interest payment she received was 3 months after she bought the bond. She sold it immediately after receiving her 12th interest payment. Leann’s yield on the bond was 10.5% per year compounded quarterly. Determine the price she paid when she purchased the bond.
Question 6 Leann just sold a $10,000 par value bond for $9,800. The bond interest rate...
Question 6 Leann just sold a $10,000 par value bond for $9,800. The bond interest rate was 5.5% per year payable quarterly. Leann owned the bond for 3 years. The 1st interest payment she received was 3 months after she bought the bond. She sold it immediately after receiving her 12th interest payment. Leann's yield on the bond was 11% per year compounded quarterly. Determine the price she paid when she purchased the bond. $ Carry all interim calculations to...
25 A corporate bond has a face value of $10,000, a bond interest rate of 6%...
25 A corporate bond has a face value of $10,000, a bond interest rate of 6% per year payable semiannually, and a maturity date of 20 years from now. If a person purchases the bond for $9000 when the interest rate in the marketplace is 8% per year, compounded semiannually. the size and frequency of the interest payments the person will receive are closest to (2.5 Points) 5400 every 6 months $270 every 6 months $360 every 6 months $300...
The duration of a twenty year, 6 percent coupon bond when the interest rate is 7.80...
The duration of a twenty year, 6 percent coupon bond when the interest rate is 7.80 years. What happens to the price of the bond if the interest rates rises to 8%? it rises 15.6% it rises 14.7% it falls 15.6% it falls 14.7%
A bond is issued at discount ________. when a bond's stated interest rate is more than...
A bond is issued at discount ________. when a bond's stated interest rate is more than the effective interest rate when a bond's stated interest rate is less than the market interest rate when a bond's stated interest rate is equal to the market interest rate when a bond's stated interest rate is higher than the market interest rate
4.Which one of the following statements about the approach to bond pricing is NOT true? Select...
4.Which one of the following statements about the approach to bond pricing is NOT true? Select one: A. To calculate a bond's price, one needs to calculate the present value of the bond's expected cash flows. B. The value, or price, of any asset is the future value of its cash flows. 6.Which one of the following statements is NOT true? Select one: A. The yield to maturity of a bond is the discount rate that makes the present value...
5. An investor who owns a bond with a 9% coupon rate that pays interest semiannually...
5. An investor who owns a bond with a 9% coupon rate that pays interest semiannually and matures in three years is considering its sale. If the yield-to-maturity on the bond is 11%, find the price of the bond per 100 of par value. 6. A bond offers an annual coupon rate of 5%, with interest paid semiannually. The bond matures in seven years. At a market discount rate of 3%, find the price of this bond per 100 of...
. Example: A bond was issued several years ago at par when the interest rate was 7 %, which was also its coupon rate (annual payment). Now, with three years left in t he bond's life, the interest rate is 8% per year. . What is the bond's price? . In another year, after the next coupon is paid and the remaining maturity falls to tw o years, how much would the bond be sold at? . What is the...
A bond has a Macaulay duration of 9.50 and is priced to yield 7.5%. If interest rates go up so that the yield goes to 8.0%, what will be the percentage change in the price of the bond? Now, if the yield on this bond goes down to 7%, what will be the bond's percentage change in price? Comment on your findings. If interest rates go up to 8.0%, the percentage change in the price of the bond is %....
Question 6 Leann just sold a $10,000 par value bond for $9,800. The bond interest rate was 5.5% per year payable quarterly. Leann owned the bond for 3 years. The 1st interest payment she received was 3 months after she bought the bond. She sold it immediately after receiving her 12th interest payment. Leann's yield on the bond was 11% per year compounded quarterly. Determine the price she paid when she purchased the bond. $ Carry all interim calculations to...
25 A corporate bond has a face value of $10,000, a bond interest rate of 6% per year payable semiannually, and a maturity date of 20 years from now. If a person purchases the bond for $9000 when the interest rate in the marketplace is 8% per year, compounded semiannually. the size and frequency of the interest payments the person will receive are closest to (2.5 Points) 5400 every 6 months $270 every 6 months $360 every 6 months $300...
5. An investor who owns a bond with a 9% coupon rate that pays interest semiannually and matures in three years is considering its sale. If the yield-to-maturity on the bond is 11%, find the price of the bond per 100 of par value. 6. A bond offers an annual coupon rate of 5%, with interest paid semiannually. The bond matures in seven years. At a market discount rate of 3%, find the price of this bond per 100 of...
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