Company OMEGA wants to invest in Bonds and Stocks. The financial manager was looking at differenttypes of Bonds and Stocks. After studying the market, he decided to choose 3 bonds and 3 stocks. Given thefollowing informationBonds: The financial manager wants to buy bonds A, B, C and he decided to buy different mumbers fromeach bond. All bonds pay annual couponBondNumber of BondsТуреDiscount BondCoupon rateYTMMaturity12 years13 yearsFace Value255.5%8.6%3000B17Par Bond100029Premium Bond18 years10.2%5.263000Stocks: The financial manager wants to buy Stocks X, Y, Z and be decided to buy different numbers fromeach stock.15 уearsTUOUPar Bond29Premium Bond10.29%5.2%18 years3000Stocks: The financial manager wants to buy Stocks X, Y, Z and he decided to buy different numbers fromeach stock.StockDividends TypeRequiredGrowthDividends 0Dividends INumber ofStockReturm2300Zero Growth10%3.8Y1900Constant15%4%1.8Growth2100Constant14%3%GrowthCalculate the total amount of investment the company needs to buy the 3 bondsand the 3 stocks.

Answered: Image /qna-images/answer/f32df643-3056-4750-b262-4060e52d116b.jpg

Bonds: The financial manager wants to buy bonds A, B, C and he decided to buy different mumbers from each bond. All bonds pay annual coupon Number of Bonds Maturity 12 years 13 years Bond Type Coupon rate YTM Face Value 25 Discount Bond 5.5% 8.6% 3000 B. 17 Par Bond 1000 29 Premium Bond 10.2% 5.2% 18 years 3000

Bonds: The financial manager wants to buy bonds A, B, C and he decided to buy different mumbers from each bond. All bonds pay annual coupon Number of Bonds Maturity 12 years 13 years Bond Type Coupon rate YTM Face Value 25 Discount Bond 5.5% 8.6% 3000 B. 17 Par Bond 1000 29 Premium Bond 10.2% 5.2% 18 years 3000

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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You are an investment manager evaluating two corporate bonds, each with a maturity value of $100,000. Each bond matures in exactly 10 years and each bond has a yield-to-maturity (YTM) of 5%. Bond 1 pays a coupon of 8% and Bond 2 pays a coupon of 3%. Without doing any math, which bond trades at a higher price? Which bond is more sensitive to changes in interest rates? If both bonds have the identical maturity date and YTM, then why do they trade at different prices? Is this a violation of The Law of One Price ? If you buy Bond 1, what is the NPV of the cash flows?
You want to determine the value of your company bond that you have held. The market has not traded your security in a long time but still makes payments semiannually 6.2% coupon and 7 years. You find two similar bonds with characteristics as follows. Bond X: 4-year 6% coupon priced at 950 Bond Y: 6-year 5% coupon priced at 980, 1000 bond value a. What is the approximate price of your bond? b. How does your bond compare to the other two bonds?
A financial advisor suggests you select one of two types of bond investments in which to invest $10,000. Bond X pays a return of 6% and has a default rate of 3%. Bond Y pays a return of 4% and has a default rate of 2%. Find the expected return and decide which bond would be a better investment. When the bound defaults, the investor losses all the investment
An investor has $633,000 to invest in bonds. Bond A yields an average of 8% and the bond B yields 5%. The investor requires that at least 3 times as much money be invested in bond A as in bond B. You must invest in these bonds to maximize his return. This can be set up as a linear programming problem. Introduce the decision variables: ?=dollars invested in bond A ?=dollars invested in bond B Compute ?+? $ ________. Round to the nearest cent.
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This is not a writting assignment...do not send this back saying otherwise!!!!! Please show me how i calculate this using excel formulas with the following information (I need to know how much I would pay for this bond): Par value of bond: $1000 Coupon rate: 4% discount rate: 6% Maturity in years: 15
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If your primary goal is current yield, which one of these bonds is the wiser investment? Bond A: $1,000 corporate bond that pays 6 percent and has a current market value of $700; or Bond B: $1,000 corporate bond that pays 7.25 percent and has a current market value of $800?

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