A bond with annual coupon rate of 5.10% and price of $1,090 just yesterday paid a coupon. A total of 23 coupons remain to be paid. Suppose you buy the bond at today’s price, hold it and receive 8 coupons, and then sell the bond. If at the time you sell the bond its YTM has decreased a total of 50 basis points, find the selling price of the bond. (FYI; 0.01=1%=100 basis points; use semiannual compounding)

Question

A bond with annual coupon rate of 5.10% and price of $1,090 just yesterday paid a coupon. A total of 23 coupons remain to be paid. Suppose you buy the bond at today’s price, hold it and receive 8 coupons, and then sell the bond. If at the time you sell the bond its YTM has decreased a total of 50 basis points, find the selling price of the bond. (FYI; 0.01=1%=100 basis points; use semiannual compounding)

Expert Answer

Want to see the step-by-step answer?

Check out a sample Q&A here.

Want to see this answer and more?

Experts are waiting 24/7 to provide step-by-step solutions in as fast as 30 minutes!*

*Response times may vary by subject and question complexity. Median response time is 34 minutes for paid subscribers and may be longer for promotional offers.
Tagged in
Business
Finance

Related Finance Q&A

Find answers to questions asked by students like you.

Q: You are evaluating two different silicon wafer milling machines. The Techron I costs $300,000, has a...

A: Calculation of EAC of Techron I and Techron II:The EAC is calculated using a excel spreadsheet. The ...

Q: if you are 18 years old, deposit $5000 each year into a traditional IRA for 52 years, at 6% interest...

A: Annuity, A = $ 5,000Interest rate per year, R = 6%Period, N = 52 years

Q: Your son has come to you for advice. He is about to enter college and has two options open to him. H...

A: As a first step, let's calculate the NPV of Pharmacy / MBA option making use of the cash flows. We w...

Q: AJ’s Market generally holds $50,000 in cash in case an unexpected investment opportunity arises. Thi...

A: AJ’s Market generally holds $50,000 in cash in case an unexpected investment opportunity arises. Thi...

Q: Why so many mergers fail to produce the expected synergistic gains?

A: Merger:It is an agreement which unites two or more companies into a new company. It helps companies ...

Q: I have a question and I literally don't know where to begin.  I am provided with a table of stock pr...

A: Let me explain to you, what you have been asked to do. But before that let me explain what informati...

Q: Better Mousetraps has developed a new trap. It can go into production for an initial investment in e...

A: At the outset, I want to bring to your notice that in the leading line of the question, we have been...

Q: Block, S., Hirt, G., & Danielsen, B. (2017). Foundations of Financial Management. New York, NY: ...

A: Calculating the anticipated return after financing costs with the most aggressive asset financing mi...

Q: Use the following information: . Debt: $79,000,000 book value outstanding. The debt is trading at 94...

A: Calculation of Total Market Value:

Q: Compute the nominal annual rate of interest for the simple annuity due. Future value: - Present valu...

A: Calculation of Nominal Annual Rate of Interest:The Nominal Annual Rate of Interest can be calculated...

Q: The Alenso corporation's target capital stucture is 50% debt and 50% common equity. The cost of comm...

A:  Formula to calculate WACC:

Q: I already ask this but I whant know how you do the calculation, please could you show me all the ste...

A: Calculating the price of bond if interest rate on the bond is 10%. We have,Price of bond = C [1- (1 ...

Q: What is the future value in 12 years of $1,000 payments received at the beginning of each year for t...

A: As a first step, let's gather all the information that question has to offer.Annuity investment = A ...

Q: Your firm is offered credit terms of 1/10, net 35. What is the effective annual interest rate on thi...

A: Calculating the value of effective interest rate on the credit terms. We have,Effective interest rat...

Q: Ms. Cristiana Piccini is valuing an investment that pays her $27,000 per year for the first ten year...

A: Calculation of Value of Investment: Excel Spreadsheet:

Q: ABC Enterprises' noncallable bonds currently sell for $1,048.50. They have a 5-year maturity, an ann...

A: The yield to maturity of a bond can be calculated using the RATE function in excel. Inputs are:Perio...

Q: A firm with sales of $500,000 has average inventory of $200,000. T he industry average for inventory...

A: Computation of inventory turnover:

Q: Participation #6:   Why is it desirable to construct capital budgeting rules so that higher-risk pro...

A: A risk is a probability of unfavorable outcome. All investments are subjected to risks.  So, a high ...

Q: Brewster’s is considering a project with a 5-year life and an initial cost of $120,000. The discount...

A: The life of the project is 5 years. However, it can be abandoned at the end of 3 years for a sale va...

Q: Suppose a family has a gross annual income of $43,200.   a. What is the maximum amount the family sh...

A: Most financial advisors recommend that one limit his mortagage payment to 28% of the monthly income ...

Q: If the volatility of a stock is .33, find the standard deviation of: (see the attachment for the rem...

A: Recall the Black Scholes model derivation.Log of the stock price is normally distributed.The expecte...

Q: suppose the rate of $1 for yen is 83 yen, what is 2,5000,000 in dollar

A: Given amount = A = 25,000,000 YenExchange rate (Yen / $) = 83 ie. 83 Yen = 1 $We have to express A i...

Q: Phillips Equipment has 80,000 bonds outstanding that are selling at par. Bonds with similar characte...

A: Calculation of weights of three components: Excel spread sheet:Note: Assumed $1,000 as par value

Q: Hi, I'm looking for help with solving the answer for the following question. I've tried it myself se...

A: Calculation of future value:There are 525,600 minutes in a year. So there are 10,512,000 minutes for...

Q: A bank's loan rate for a machine is 9%. Determine the effective rate on the basis of the compounding...

A: The effective interest rate or the effective annual rate (EAR) is the actual rate paid or earned on ...

Q: Consider a $5,000 deposit earning 10 percent interest per year for ten years. What is the future val...

A: Future Value (FV)Future value is the specific value or amount of an investment at a specific date in...

Q: Is the corporate tax schedule progressive? Why or why not?

A: A tax schedule can either regressive or progressive. It depends upon how the scehdule has been drawn...

Q: In November 2017 treasury 41/2s of 2044 offered a semiannually compaunded yiedl to maturity of 2.66%...

A: Asssuming there are no typos in the question, phrase ' 4 1/2 s of 2044' refers to a bond that pays a...

Q: Bank  M offers the following terms for a $10 million loan: interest rate: 8 percent for one year on...

A: If the firm intends to borrow the $10 million for the entire year.For Bank M:Interest rate is 8 %. S...

Q: I already ask this but I whant know how you do the calculation, please could you show me all the ste...

A: Calculating the price of bond if bond mature in 10 year. We have,Price of bond = C [1- (1 / (1+r)n ]...

Q: I have been working on the question below and I'm stuck on how to finish it up.  I have provided wha...

A: The below are the possible considerations:It is characterized as a connection between the prices of ...

Q: I now have $16,000 in the bank earning interest of 1.00% per month. I need $26,000 to make a down pa...

A: Calculation of Duration of the Investment:The Duration of the Investment can be calculated using a e...

Q: Calculate the future value after 3 years if $1,000 is deposited at 1.2% interest compounded monthly.

A: Calculate the future value after 3 years if $1,000 is deposited at 1.2% interest compounded monthly....

Q: What is the present value of end-of-year cash flows of $9,000 per year, with the first cash flow rec...

A: Cash flow: It denotes to the sum of cash that keeps flowing in the business and out of business duri...

Q: A company goes public with an offering price of $18. There is a 7 percent underwriting spread. There...

A: Overallotment option with the underwriter = 15% of shares on offer = 15% x 25 mn = 3.75 mn sharesThe...

Q: The simplified balance sheet for the Dutch manufacturer Rensselaer Felt (figures in € thousands) is ...

A: The firm has three sources of capital:Short term debtLong term debtEquityWe need to estimate the mar...

Q: Six potential services a bank provides?

A: A bank is a financial institution that accepts deposits from the public and makes loans from these d...

Q: What is opportunity cost and how does it affect the decision-making process for business decisions?

A: Discuss the opportunity cost and the way how it affects the decision making process for business dec...

Q: Required: Use an Excel spreadsheet to calculate the net present value NPV from a "Parent company per...

A: Calculating the value of total cost of plant and depreciation expenses using straight-line method in...

Q: Let C be the price of a call option that enables its holder to buy one share of a stock at an exerci...

A: Given that, K is the exercise price, S is stock price at time 0.

Q: dpb corporate bonds have a coupon rate of 9.2% APR (sa). The yeild to maturity is 8.5% APR (Sa). the...

A: Semi annual payments. Hence the period here is semi annual or half year. Hence, n = 2 x years to mat...

Q: Mexican Motor's market cap is 200 billion pesos. Next year's cash flow is 8.6 billion pesos. Securit...

A: Mexican Motor's market cap, E = 200 billion pesos.Next year's cash flow, C =  8.6 billion pesos.Secu...

Q: Storico Co. just paid a dividend of $1.45 per share. The company will increase its dividend by 24 pe...

A: D0 = $1.45;Year1 growth rate = g1 = 24%;Year 2 growth rate, g2 = g1 - 6% = 24% - 6% = 18%Year 3 grow...

Q: Until August 1971, industrialized countries around the world maintained a fixed exchange rate of the...

A: Answer 1:The correct answer is “Forward exchange rate”.Justification:  A forward exchange rate is wh...

Q: Please help do this calculation step by step I have problems getting the final answer.

A: Calculating the value of weighted-average cost of capital (WACC). We have,WACC = (Weight of Equity x...

Q: Bethesda Water has an issue of preferred stock outstanding with a coupon rate of 3.80 percent that s...

A: Calculation of cost of preferred stock:

Q: Kaye's Kitchenware has a market/book ratio equal to 1.200. The firm's stock price is 12.30 USD/share...

A: Market/book ratio of equity = 1.200Hence, MVE / BVE = 1.2Current stock price, P = $ 12.30 / shareNos...

Q: Bill Clinton reportedly was paid $10 million to write his book My Life. Suppose the book took three ...

A: Since you have specifically asked for excel workings, a snpashot of the excel model is attached for ...

Q: NOTE: You already replied on this question with the answers as indicated below. Unfortunately, all a...

A: Part (a)All financials below are in $ mn.The net cash flow at time 0 if the old equipment is replace...

Q: Heidi owns 680 shares of Boyd Enterprises, which is priced at $65.44 per share. The company plans a ...

A: Number of stocks prior to stock split, Npre = 680Proposed stock split: 6 for 5 that is a shareholder...