Bond X and Bond Y were issued at a premium to par value three years ago....
Bond X and Bond Y were issued at a premium to par value three years ago. Bond X matures in five years, and Bond Y matures in ten years. Both bonds carry the same credit rating. Bond X has a coupon of 7 .25%, and Bond Y has a coupon of 8.00%. If the yield to maturity for both bonds is 7.60% today: A. both bonds are priced at a premium. B. Bond X is priced at a premium, and Bond Y is priced at a discount. C. Bond X is priced at a discount, and Bond Y is priced at a premium.
Homework Answers
B. Bond X is priced at a premium, and Bond Y is priced at a discount.
When coupon rate is less than yield to maturity, bonds are priced at a discount. When coupons rate is more than the yield to maturity, bonds are priced at a premium.
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Bond X and Bond Y were issued at a premium to par value three
years ago....
A 10 year bond was issued three years ago. It has a FaceValue of $1000 and...
A 10 year bond was issued three years ago. It has a FaceValue of $1000 and makes coupon payments of $23 every six months. If the current yield to maturity is 4.6% p.a. compounding semi-annually, will this bond sell at a premium, discount or at par today?
A 1o year bond was issued three years ago. It has a Face Value of $1000...
A 1o year bond was issued three years ago. It has a Face Value of $1000 and makes coupon payments every six ite arrentyield to maturity is 66% pa cor p this bond sell at a premium discount or at par today? months urang sem-anuary wil o a par b. discount O c not enough information provided to determine
A 1o year bond was issued three years ago. It has a Face Value of $1000...
A 1o year bond was issued three years ago. It has a Face Value of $1000 and makes coupon payments every six ite arrentyield to maturity is 66% pa cor p this bond sell at a premium discount or at par today? months urang sem-anuary wil o a par b. discount O c not enough information provided to determine
Question 2 Two years ago, MTR issued $1,000 ten-year bonds that carry a coupon rate of...
Question 2 Two years ago, MTR issued $1,000 ten-year bonds that carry a coupon rate of 8% payable semi-annually. Required: a. If you require an effective annual rate of return of 12%, how much are you willing to pay for the bond today? b. What will be the bond price if the yield to maturity falls to 6% in one year?. c. From the answer computed in above part (b), identify, with brief explanation (within 30 words), whether the bond...
Land,eToys is a profitable, medium-sized, retail company. Several years ago, it issued a 6.5% coupon bond,...
Land,eToys is a profitable, medium-sized, retail company. Several years ago, it issued a 6.5% coupon bond, which pays interest semi-annually. The bond has a par value of $1,000 and will mature in ten years. It is currently priced in the market as $1,037.19 The average yields to maturity for 10-year corporate bonds are reported in the following table by bond rating: Yield (%) | Bond Rating Yield (%) 7.3 8.2 9.2 10.5 12.0 14.5 Bond Rating 5.4 5.7 6.5 Periodically,...
2. A bond matures in 7 years, has a par value of $1,000, and an annual...
2. A bond matures in 7 years, has a par value of $1,000, and an annual coupon payment of $70. Investors require a return of 8.5%. Calculate the price of the bond. [8 points] 3. A bond is priced at $1,280, has a par value of $1,000, 15 years to maturity, and a $135 annual coupon. The bond is callable in 5 years at $1,050. Calculate the yield to call. [8 points] 4. If 10-year Treasury bonds yield 6.2%, 10-year...
Question 2 (15 marks) Two years ago, MTR issued $1,000 ten-year bonds that carry a coupon...
Question 2 (15 marks) Two years ago, MTR issued $1,000 ten-year bonds that carry a coupon rate of 8% payable semi-annually. Required: a. If you require an effective annual rate of return of 12%, how much are you willing to pay for the bond today? b. What will be the bond price if the yield to maturity falls to 6% in one year?. c. From the answer computed in above part (b), identify, with brief explanation (within 30 words), whether...
Land’o’Toys is a profitable, medium-sized, retail company. Several years ago, it issued a 6.5% coupon bond,...
Land’o’Toys is a profitable, medium-sized, retail company. Several years ago, it issued a 6.5% coupon bond, which pays interest semi-annually. The bond has a par value of $1,000 and will mature in ten years. It is currently priced in the market as $1,037.19. The average yields to maturity for 10-year corporate bonds are reported in the following table by bond rating: Bond Rating Yield (%) Bond Rating Yield (%) AAA 5.4 AA 5.7 A 6.0 BBB 6.5 BB 7.3 B...
1. Bond A sells at a premium, so the YTM must be less than the coupon...
1. Bond A sells at a premium, so the YTM must be less than the coupon rate. Assume the required rate of return remains constant when we're trying to determine the likelihood of a call being made. If the YTM stays less than the 9% coupon rate, then 5 years from now when the call protection ends, the bond issuer will call the bond, pay the call premium, and refinance with new bonds at lower market rates. Thus, the market...
1a) You just learned from your sister that you can buy a $1,000 par value bond...
1a) You just learned from your sister that you can buy a $1,000 par value bond for $800. The coupon rate is ten percent (paid annually), and there are ten years left until the bond matures. You should purchase the bond if your require twelve percent return on bonds with this similar risk level. True/False? 1b) A corporate bond with ten years to maturity has an annual coupon rate of six percent. The bond today is selling for $1,000. With...
A 1o year bond was issued three years ago. It has a Face Value of $1000 and makes coupon payments every six ite arrentyield to maturity is 66% pa cor p this bond sell at a premium discount or at par today? months urang sem-anuary wil o a par b. discount O c not enough information provided to determine
A 1o year bond was issued three years ago. It has a Face Value of $1000 and makes coupon payments every six ite arrentyield to maturity is 66% pa cor p this bond sell at a premium discount or at par today? months urang sem-anuary wil o a par b. discount O c not enough information provided to determine
Land,eToys is a profitable, medium-sized, retail company. Several years ago, it issued a 6.5% coupon bond, which pays interest semi-annually. The bond has a par value of $1,000 and will mature in ten years. It is currently priced in the market as $1,037.19 The average yields to maturity for 10-year corporate bonds are reported in the following table by bond rating: Yield (%) | Bond Rating Yield (%) 7.3 8.2 9.2 10.5 12.0 14.5 Bond Rating 5.4 5.7 6.5 Periodically,...
2. A bond matures in 7 years, has a par value of $1,000, and an annual coupon payment of $70. Investors require a return of 8.5%. Calculate the price of the bond. [8 points] 3. A bond is priced at $1,280, has a par value of $1,000, 15 years to maturity, and a $135 annual coupon. The bond is callable in 5 years at $1,050. Calculate the yield to call. [8 points] 4. If 10-year Treasury bonds yield 6.2%, 10-year...
Question 2 (15 marks) Two years ago, MTR issued $1,000 ten-year bonds that carry a coupon rate of 8% payable semi-annually. Required: a. If you require an effective annual rate of return of 12%, how much are you willing to pay for the bond today? b. What will be the bond price if the yield to maturity falls to 6% in one year?. c. From the answer computed in above part (b), identify, with brief explanation (within 30 words), whether...
1. Bond A sells at a premium, so the YTM must be less than the coupon rate. Assume the required rate of return remains constant when we're trying to determine the likelihood of a call being made. If the YTM stays less than the 9% coupon rate, then 5 years from now when the call protection ends, the bond issuer will call the bond, pay the call premium, and refinance with new bonds at lower market rates. Thus, the market...
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