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Krishna buys an -year 1000 bond at par. The Macaulay duration is 7.959 years using an annual effective interest rate of 7.2%.
Calculate the estimated price of the bond, using the first-order modified approximation, if the interest rate rises to 8.0%.
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- 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?Billy has a bond paying semiannual coupons that has an annual coupon rate of 10%, a term of 15 years, and both face and redemption values of 20,000. Coupons are paid at the end of each 6 month period, starting 6 months after issue. Billy sells the bond to Mandy 34 months and 15 days after issue at an annual yield of 8% convertible semiannually. What price does Mandy pay Billy?On January 1, 2021, Austin plans to pay $1,050 for a $1,000, 12% semiannual bond. He will keep the bond for three years, receive six coupon payments, and then sell it. How much should he sell the bond for in order to receive a yield of 10% compounded semiannually?
- 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 placesBob uses 19481 to purchase a 10-year par-value bond (i.e. redeems at face-value). Coupons are paid out annually (end of the year) and each coupon is equal to 2% of the face-value of the bond. If each coupon payment is invested into an account that earns an effective annual interest rate of 2.4%, then what is the face-value of the bond if Bob realizes an overall yield of 3.36% per year effective over the 10 year period? Give your answer rounded to the nearest whole number (i.e. X).Lola Ruiz has a bond that has 10 years to maturity, a face value of $1,000, an 7 percent interest rate, and a market price of $1,350. What is the dollar amount of annual interest on this bond?
- Having an opportunity to acquire a certain bond that has a face value of P1M and matures in 5 years, Lenard decided to buy the bond. This means that when the bond reached its maturity date, he will be receiving P1.2M. The bond is contracted at a foxed nominal rate of 16% and interest payments to be paid quarterly. On the other hand, Lenard would like to earn an 18% nominal interest compounded quarterly. Given the scenario, determine how much Lenard should be willing to pay to gain the bond.If Annie buys the bond today at its $1,000 par value and holds it for exactly 3 years, at which time the required return is 7.0%, how much of a gain or loss will she experience in the value of the bond (ignoring interest already received and assuming annual interest)? Rework part (f), assuming that Annie holds the bond for 10 years and sells it when the required return is 7.0%. Compare your finding to that in part (f), and comment on the bond's maturity risk. Assume that Annie buys the bond at its current price of $983.80 and holds it until maturity. What will her current yield and yield to maturity (YTM) be, assuming annual interest? After evaluating all of the issues raised above, what recommendation would you give Annie with regard to her proposed investment in the Atilier Industries bonds?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.
- Suppose that Jenna just bought a newly issued 15-year bond with a coupon rate equal to 7%. If Jenna sells the bond at the end of the year when the market price is $917, what would be the bond's yield to maturity?Carrie's clothes, has a five year bond oustanding that pay $60 annually. The face value of each bond is $1,000, and the bond sells for $890. a. what is the bond's coupon rate? b. what is the current yield? c. what is the yield to maturity?On 5th December 2020, Jerome purchases a government bond worth $400, with a maturity of 3 years, face value of $500, and a coupon rate of 5% paid annually. The first coupon payment will be received a year from now (i.e., on 5th December, 2021). The yield to maturity offered by equally risky bonds is currently 7%. Such a yield to maturity stays constant over the next two years. On 5th December 2022, Jerome decides to sell this bond after receiving the second coupon payment. It turns out that, on that day, the new yield to maturity offered by equally risky bonds is 1.5%. At what price will Jerome be able to sell his bond?