A was issued at a price of Php1,011.80 which carries a face value of Php1,000.00 and a coupon at 10% p.a., which of the following statements is correct? a The market rate of return must be greater than the coupon rate of 10%. b The yield of the instrument is 9%. c The market rate of return must be equal to the coupon rate of 10%. d The market rate of return must be lower than the coupon rate of 10%.

A was issued at a price of Php1,011.80 which carries a face value of Php1,000.00 and a coupon at 10% p.a., which of the following statements is correct? a The market rate of return must be greater than the coupon rate of 10%. b The yield of the instrument is 9%. c The market rate of return must be equal to the coupon rate of 10%. d The market rate of return must be lower than the coupon rate of 10%.

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter8: Analysis Of Risk And Return

Section: Chapter Questions

Problem 9P

See similar textbooks

Similar questions

1. Bond Delta was issued at a price of Php1,011.80 which carries a face value of Php1,000.00 and a coupon at 10% p.a., which of the following statements is correct? Group of answer choices a. The yield of the instrument is 9%. b. The market rate of return must be lower than the coupon rate of 10%. c. The market rate of return must be greater than the coupon rate of 10%. d. The market rate of return must be equal to the coupon rate of 10%.
Assume that a 5-month forward contract on a zero-coupon bond with marketface value of Php5,000 and is currently trading at Php4,777. Suppose thatthe annual risk-free interest rate is 6.28%, How much is the arbitrage profit?
In a given securities market, an investment at time t=0 of £95 generates a return of £105 at time t=2 years. However, an investment of £95 at time t=2 (which is agreed from the outset) generates a return of £108 at time t=5 years. Given that the 5-year par yield is 5.3%, calculate, to two decimal places, the current price of a 5-year bond of £10,000 nominal paying coupons at a rate of 4.5% per annum and redeemed at 95%.
Two years ago, Malayawata Steel issued RM 100 million worth of ten-year bonds with a face value of RM1,000.00 and a coupon rate of 5%. Coupon payments are made semi-annually.Two years ago, the market yield-to-maturity was 3% p.a.Due to the increased insecurity facing the industry, the market yield to maturity is now 7% p.a.a) Determine the market price of the bonds at issue based on an appropriate model.b) Based on the yield-to-maturity today, assess whether the price has changed and proceed to determine its market price today.c) Compare the results in (a) and (b) above and interpret the sensitivity of bond prices to maturity and yield to maturity.
The current yield on a bond worth P800 with a par value of P1,000 and a coupon rate of 12% is
Suppose that $10,000 of a 6-year fixed-principal Treasury note with a coupon rate of 6.5% is purchased by a dealer firm to create zero-coupon Treasury securities. Let’s assume the appropriate annual yield is 8%. What should be the current value of the zero-coupon Treasury security created from the fifth coupon payment?
Two years ago, Company XYZ issued $100 million worth of ten-year bonds with a face value of $1,000 and a coupon rate of 5%. Coupon payments are made semi-annually. Two years ago, the market yield-to-maturity was 3% p.a. Due to the increased insecurity facing the industry, the market yield to maturity is now 7% p.a. a) Determine the market price of the bonds at issue based on an appropriate model. b) Based on the yield-to-maturity today, assess whether the price has changed and proceed to determine its market price today. c) Compare the results in (a) and (b) above and interpret the sensitivity of bond prices to maturity and yield to maturity.
Pakistan bank issues a 10-year treasury bond at 12% coupon with the par value of 1000 Rupees. If the market yield increases shortly afterwards, what happens to the following parameters: a) coupon rate b) price c) current yield d) yield to maturity. Use formula not excel working
A financial institution has the following assets: • A portfolio of 10-year zero-coupon bonds with a face value of $22 million and currently yielding 7.6% • A €8 million trading position in spot euros, with the current exchange rate of $1.43/€ • A $16 million trading position in equities Calculate the DEAR for a portfolio of these three assets. The correlation coefficients are 0.27 for the bonds and the euros, -0.24 for the bonds and the equities, and 0.33 for the equities and the euros.
For a 1 month gb t-bill, with a coupon of 0, bid price of 99.849 and ask price of 99,855. Calculate the bond yield.
Assume that a 5-month forward contract on a zero-coupon bond with marketface value of Php5,000 and is currently trading at Php4,777. Suppose thatthe annual risk-free interest rate is 6.28%. Determine the forward contract price under the no-arbitrage principle.
Last year Carson Industries issued a 10-year, 13% semiannual coupon bondat its par value of $1,000. Currently, the bond can be called in 6 years at a price of $1,065and it sells for $1,200.a. What are the bond’s nominal yield to maturity and its nominal yield to call? Would aninvestor be more likely to earn the YTM or the YTC?b. What is the current yield? Is this yield affected by whether the bond is likely to be called?(Hint: Refer to footnote 6 for the definition of the current yield and to Table 7.1.)c. What is the expected capital gains (or loss) yield for the coming year? Is this yielddependent on whether the bond is expected to be called? Explain your answer.