Bonds of TLM Corporation with a par value of R1000 sell for R960, mature in five years, and have a 7% annual coupon rate paid semi-annually. Calculate the current yield and the yield to maturity Assume a 10-year, $1,000 par value bond with a 10 percent annual coupon if its required rate of return is 10 percent what is the value of the bond? What would be the value of the bond described in part b if, just after it had been issued, the expected inflation rate rose by 3 percentage points? Would we now have a discount or a premium bond? What would happen to the bonds' value if inflation fell, by 3 %? Would we now have a premium or a discount bond (a) Current yield = YTM = (b) Bond price (i) Bond price = Disc/Prem: (ii) Bond price = Disc/Prem:
Bonds of TLM Corporation with a par value of R1000 sell for R960, mature in five years, and have a 7% annual coupon rate paid semi-annually. Calculate the current yield and the yield to maturity Assume a 10-year, $1,000 par value bond with a 10 percent annual coupon if its required rate of return is 10 percent what is the value of the bond? What would be the value of the bond described in part b if, just after it had been issued, the expected inflation rate rose by 3 percentage points? Would we now have a discount or a premium bond? What would happen to the bonds' value if inflation fell, by 3 %? Would we now have a premium or a discount bond (a) Current yield = YTM = (b) Bond price (i) Bond price = Disc/Prem: (ii) Bond price = Disc/Prem:
Chapter6: Fixed-income Securities: Characteristics And Valuation
Section: Chapter Questions
Problem 16P
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- Bonds of TLM Corporation with a par value of R1000 sell for R960, mature in five years, and have a 7% annual coupon rate paid semi-annually.
Calculate the current yield and the yield to maturity
- Assume a 10-year, $1,000 par value bond with a 10 percent annual coupon if its required
rate of return is 10 percent what is the value of the bond? - What would be the value of the bond described in part b if, just after it had been issued, the expected inflation rate rose by 3 percentage points? Would we now have a discount or a premium bond?
What would happen to the bonds' value if inflation fell, by 3 %? Would we now have a premium or a discount bond
|
(a) Current yield = |
|
YTM = |
|
(b) |
|
(i) Bond price = |
|
Disc/Prem: |
|
(ii) Bond price = |
|
Disc/Prem: |
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