5. In order to purchase a 1000 par value 10 year bond, yielding an annual nominal rate of 8% compounded semiannually, and paying semiannual coupons at an annual nominal rate of 6%, Janet borrows money from a bank at an effective annual rate of 5%. She has to pay the amount she has borrowed plus interest in one single payment at the end of 10 years. Janet reinvests all coupon payments she receives in an account that gains interest at a nominal rate of 10% convertible semiannually. At the end of 10 years, how much remains from Janet's investment after she pays all she owes on the loan?

5. In order to purchase a 1000 par value 10 year bond, yielding an annual nominal rate of 8% compounded semiannually, and paying semiannual coupons at an annual nominal rate of 6%, Janet borrows money from a bank at an effective annual rate of 5%. She has to pay the amount she has borrowed plus interest in one single payment at the end of 10 years. Janet reinvests all coupon payments she receives in an account that gains interest at a nominal rate of 10% convertible semiannually. At the end of 10 years, how much remains from Janet's investment after she pays all she owes on the loan?

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Kendra buys a 7 year, $100,000.00 face value, 4.250% coupon bond. The bond is priced to yield r(365) = 2.000%, and is secured by a sinking fund (set up by the issuer with quarterly deposits), that earns 5.750% compounded weekly. On default, Kendra claims the balance in the sinking fund. How much does she lose if the issuer defaults after 6 years (just after making their coupon payment, and sinking fund deposit).
Stacy purchases a $60,000 bond for $57,500. The coupon rate is 6% per year payable quarterly. The bond has a 15 year life, at which time it is cased in for face value. The bank's interest is 4.8% per year compounded monthly. Stacy decides to sell the bond at the end of 8 years. What is the bond value at this time? work in terms of excel
Shannon purchases a bond for $952.00. The bond matures in 3 years, and Shannon will redeem it at its face value of $1,000. Coupon payments are paid annually. If Shannon will earn a yield of 12%/year compounded yearly, what is the bond coupon rate?
Bill buys a 10-year 1000 par value 5% bond with semi-annual coupons. The price assumes a nominal yield of 6%, compounded semi-annually. As Bill receives each coupon payment, he immediately puts the money into an account earning interest at an annual effective rate of i. At the end of 10 years, after the final coupon, redemption value and accumulated value in the extra account shows that Bill has earned at an annual rate of 6.5%. Calculate i.
An investor borrows an amount at an annual effective interest rate of 7% and will repay all interest and principal in a lump sum at the end of 10 years.She uses the amount borrowed to purchase a 1000 par value 10-year bond with 10% semiannual coupons bought to yield 8% convertible semiannually.All coupon payments are rein-vested at a nominal rate of 6% convertible semiannually. Calculate the net gain to the investor at the end of 10 years after the loan is repaid.
Jason buys a 15-year $100 par value 8% bond with semiannual coupons. The price assumes a nominal yield of 6% compounded semiannually. As Jason receives each coupon payment, he immediately invests it in an account earning interest at an annual nominal rate of j, compounded semiannually. At the end of 15 years, immediately after receipt of the final coupon payment and the redemption value of the bond, Jason has earned an annual effective yield of 9% on the investment in the bond. Calculate j. Write your answer as a percent, rounded to 4 decimal places
Eren purchased a bond, costing 890, three years ago, with a current price of 925. This bond paid 100 year as interest payments ( end of each year). She wants to hold the bond for 4 more years and it is expected to be sold at the end of year four at 960. It is also expected that there will be no default of yearly interest payments. Assuming that the required rate of return is 11.25%. Compute the price of the bond?
Isabel purchases a 10-year, 5 percent savings bond with a face value of $1,000 by paying a premium for $1,100. She gets the dividend paid yearly. Determine the rate of return she gets on the bond assuming she keeps the bond till maturity.
Ms. Jones wants to make 8% nominal interest compounded quarterly on a bond investment. She has an opportunity to purchase a 6%, $10,000 bond that will mature in 16 years and pays quarterly interest. This means that she will receive quarterly interest payments on the face value of the bond ($10,000) at 6% nominal interest. After 16 years she will receive the face value of the bond. How much should she be willing to pay for the bond today?
John purchases a $600 bond that has 6 remaining semi-annual 7% coupon payments for $510. What would be his return per half year period?
Ms. Jones want to make 12% nominal interest compunded quarterly on a bond investment. She has an opportunity to purchase a 10% , $10000 bond that will mature in 18 years and pays quarterly interest. this means that she eill receive quarterly interest payments on the face value of the bond ($10000) at 10% nominal interest. after 18 years she will receive the face value of the bond. How much should she be willing to pay for the bond today?
Susan can buy a zero-coupon bond that will pay 1,000 at the end of 12 years and is currently selling for 624.60. Instead, she purchases a bond with 6% semi-annual coupons that will pay 1,000 at the end of 10 years. If she pays X for this bond she will earn the same annual effective interest rate as the zero-coupon bond. Calculate X.

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